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Central bank meetings in spotlight this week

Daily Currency Update

USD - United States Dollar

Currency markets were largely muted on Monday morning as investors waited for Q3 GDP data from the US and central bank meetings in Canada, Japan and the Euro zone, all due this week.

The US dollar bounced back against a basket of major currencies on Monday morning, trading around 93.80 at the time of writing. The US Dollar Index initially dipped to a one-month low in earlier trading after US Federal Reserve Chair Jerome Powell said on Friday it was not yet time to begin raising interest rates.

Key Movers

This week is shaping up to be a key week for the euro as the European Central Bank meets on Thursday. The market is pricing in a 10-basis-point rate hike next year as inflation expectations are finally moving higher. However, the concern for the ECB will be that these inflation expectations are being predominantly driven by the skyrocketing energy prices and are not aligned with the economic growth outlook. This could lead the ECB to disappoint the market by playing down expectations of policy tightening in 2022. This would be a blow for the EUR and could see a decent selloff. EURUSD was down 0.30% at around 1.1612 at the time of writing.

Sterling opened higher this morning, supported by the possibility of a rate hike in November, but gains were capped by concerns about inflation and economic growth. News headlines also suggested plan B could be put into action in the UK in an attempt to tackle ongoing COVID-19 concerns. GBPUSD was up 0.14% trading around 1.3770 at the time of writing.

Wednesday’s Australian CPI data will be closely watched; analysts are expecting an annual pace of 3.8%. The week is set to be rounded out by Australian retail sales on Friday. AUDUSD was up 0.44% trading at 0.74972 at the time of writing.

Expected Ranges

  • EUR/USD: 1.1595 - 1.1665 ▼
  • GBP/USD: 1.3746 - 1.3789 ▲
  • AUD/USD: 0.7464 - 0.7504 ▲
  • USD/CAD: 1.2341 - 1.2386 ▲