The U.S. dollar firmed against the euro and held relatively steady against most of its major counterparts early Monday as investors braced for a full state of U.S. data this week that will shed new light on the durability of the recovery. Worries about the strength of the U.S. recovery increased last week after the Fed issued a statement following its regularly scheduled meeting that it anticipants a more subdued rate of recovery. The U.S. central bank's generally dovish tone was backed by weak housing data and by a downward revision to U.S. growth during the first quarter.
A G20 meeting of world leaders over the weekend had little impact on financial markets. For the most part, the G20 leaders agreed to have differing views on how best to confront rising deficits amid softening growth prospects.
In addition to its softer tone against the greenback, the euro tumbled to a new record low against the Swiss franc. The Swissie also strengthened to an 8-week high against the U.S. currency after comments from a Swiss central bank official suggested policymakers will not stand in the way of a strong franc.
The Canadian dollar weakened modestly against the U.S. dollar on Monday with a slight decline to oil prices to around $78 a barrel weighing some on the loonie. Canada's holiday-shortened week will see investors focus on wholesale inflation on Tuesday and monthly growth data on Wednesday.
The highlight for the U.S. data calendar will be the monthly jobs report due Friday that is forecast to show a reduction of around 100,000 workers in June. Investors this morning will study U.S. personal income and spending data for May.
: The euro started Monday broadly weaker against its major rivals, underscored by its tumble to a new all-time low against the Swiss franc. Persistent worries about the euro zone's sovereign debt crisis should help to limit any sustainable rally in the single currency. Uncertainty ahead of a German presidential election set for Wednesday is also dragging on the common currency.
Overall investor sentiment still seems to favor risk aversion, providing a market backdrop in which riskier currencies, such as the single currency, tend to underperform. A busy weak for global data should see investors head into the upcoming U.S. holiday weekend with a better understanding of the pace of the global recovery. Weak data would point to a cooling world economy, a scenario that should bode best for safe haven currencies like the greenback and yen.
: The British pound steadied against the dollar following the release of a UK budget last week that many deemed as being tough enough to tackle the nation's mountain of debt. The pound last week had rallied in response to the government's plans to drastically improve its finances, hitting a six-week high against the greenback and a one and a half year high against the single currency.
However, uncertainty over how much impact the planned tax hikes and government spending reductions will have on U.K. growth are expected to limit the scope of the sterling's upward momentum.
: The Japanese yen steadied after hitting a one-month high against the U.S. dollar on Friday. Weaker-than-expected Japanese data on Monday put some mild pressure on the yen. Japanese retail sales rose 2.8% (y/y) in May, its slowest pace in four years. Investors had expected local retail sales to increase 4.6% (y/y) after gaining 4.9% (y/y) the previous month.
: U.S. personal spending rose 0.2% (m/m) in May, which was double the 0.1% (m/m) increase the market had forecast. U.S. personal income gained 0.4%(m/m) in May, which was just below the 0.5% (m/m) increase investors had expected. The pick up in U.S. consumer spending in May should help to ease worries about a slowing rate of recovery.
The data also revealed that the U.S. savings rate rose to an eight-month high in May, which pointed to a retrenching U.S. consumer amid a high level of joblessness. The PCE price index, a favored inflation gauge by the Federal Reserve, was unchanged in May (0.0% m/m), which suggested the U.S. central bank has ample scope to keep U.S. rates low over the coming months.
The dollar held near session peaks against the euro, though it softened against the Japanese yen after U.S. stock futures ticked into negative territory following this morning's mixed U.S. data.