Major currencies traded in tight ranges on Monday as traders braced for a heavy week of central bank decisions and corporate earnings while falling oil prices and Treasury yields softened the dollar.
Central Banks Weigh Rate Decisions as Traders Watch Policy Signals
Major currencies hovered in narrow bands as five central banks prepared to take center stage. Markets widely expect the U.S. Federal Reserve, the European Central Bank, and the Bank of Japan to keep interest rates steady, while pricing in potential rate hikes from the Bank of Canada and the Reserve Bank of New Zealand.
Chris Weston, head of research at Pepperstone, remarked in a written note that forward guidance could hold greater significance than the actual rate outcomes.
The decisions themselves may be largely discounted. The real issue that could move the dial in short-term rates and by extension is how policymakers shape expectations for subsequent meetings and whether markets need to reprice the forward rates curve.
Chris Weston, head of research at Pepperstone
The euro rose 0.16% against the greenback to $1.122, supported by market relief after France avoided a Moody’s credit downgrade despite ongoing social unrest.
Sterling strengthened 0.1% to $1.3385, while the dollar index slipped to 101.64. Across other major pairs, the Australian dollar fetched $0.7030 down 0.04%, the kiwi traded 0.06% stronger at $0.572, and the Japanese yen held steady at 156.920 per dollar.
Falling Oil Prices and Yields Soften the U.S. Dollar
Brent crude futures dipped over 1% to around $115 a barrel after touching a six-month high the prior week, driving a pullback in the U.S. dollar alongside compressing yield differentials.
Yields on 10-year Treasury notes declined to 4.974%, while 30-year yields settled at 5.299%, both lingering near one-month lows as U.S. Treasuries mostly maintained their safe-haven gains.
Ray Attrill, head of foreign exchange strategy at National Australia Bank, noted that the American bond market appeared to be driving broader currency performance.
I think the market is sort of responding to the fall we’ve seen in Treasury yields and the fact that yield differentials between the US and other kind of G10 majors are compressing. I think that’s taken a little bit of the heat out of the US dollar.
Ray Attrill, head of FX strategy at National Australia Bank
Precious Metals and Cryptocurrencies Face Downward Pressure
Spot gold traded slightly lower at $3,986.16 per ounce amid expectations for future Federal Reserve monetary policy direction.
In cryptocurrencies, bitcoin was down 0.6% at $79,925.84, while ether was 1.1% lower at $2,317.33, according to Brecorder.
Market participants are also eyeing an October consumer confidence report, weekly jobless claims, and the Personal Consumption Expenditures (PCE) price index.
