Dollar Continues to Build Momentum Ahead of Beige Book
GBP
GBP/USD has fallen further, now trading at 1.2965 (interbank), its lowest since 19 August, while GBP/EUR is higher at 1.2028 (interbank).
Yesterday, Bank of England Governor Andrew Bailey emphasised the need for the central bank to improve its oversight of the less transparent non-banking sector. Speaking at a Bloomberg event in New York, Bailey remarked, "We are nearing a point where we must shift from rulemaking to surveillance" to better monitor financial activities outside traditional banking channels. The Pound has faced pressure following lower consumer and producer inflation, coupled with weak labour market data.
These factors are raising expectations that the BoE may cut interest rates by 25 basis points in November, with another reduction likely in December.
Today’s Events (GMT):
14:25 - BoE Gov Bailey Speaks
EUR
EUR/USD continues its downward trend, trading at 1.0775 (interbank), close to its lowest level since June.
The euro has extended its losses against other major currencies following the IMF's downgrade of the eurozone's economic growth forecast.
Yesterday, at the IMF and World Bank annual meetings yesterday, ECB President Christine Lagarde reiterated that the disinflation trend remains intact but noted that future progress will depend on upcoming economic data.
Some ECB officials have recently debated whether interest rates should be lowered further below the so-called neutral rate to stimulate growth and curb inflation risks.
The ECB has already reduced its Deposit Facility Rate three times this year and is expected to do so again at the December meeting.
Today’s Events (GMT):
15:00 - ECB President Lagarde Speaks
15:00 - ECB's Lane Speaks
USD
The Dollar Index, which tracks the U.S. dollar against a basket of six major currencies, is at 104.33, marking its highest level since 1 August.
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The index is poised for its best monthly performance since September 2022. The dollar remains strong, with market trends driven by the upcoming U.S. presidential election on 5 November, where betting markets are increasingly favouring a Donald Trump victory.
Similar to the trend seen in 2016, the dollar gained during Trump’s presidency, largely due to the US-China "trade war." A Trump victory is expected to result in higher tariffs and lower taxes, which could push the Federal Reserve back towards a more restrictive monetary policy.
While today’s economic data is light, the highlight will be the release of the Fed’s Beige Book report on economic conditions. The previous Beige Book’s soft showing contributed to the FOMC’s decision to begin with a 50bp cut in September.
Today’s Events (GMT):
14:00 - FOMC Member Bowman Speaks
19:00 - Beige Book
CAD
USD/CAD is slightly higher, trading at 1.3826 (interbank).
All eyes are on today’s Bank of Canada interest rate decision, where the central bank is expected to cut rates for the fourth consecutive meeting. This time, there is a general consensus for a 50-basis point cut, lowering the key interest rate to 3.75%. Markets will also closely follow the BoC’s press conference for further guidance on monetary policy.
In his latest comments on 24 September, BoC Governor Tiff Macklem suggested that, given the ongoing progress in reducing inflation towards the 2% target, additional rate cuts are likely. Consumer inflation dropped to 1.6% in September, the lowest level in over three years, marking the second consecutive month within the BoC’s target range.
Meanwhile, oil prices have softened, with Brent crude down 0.45% to $75.48 per barrel, and West Texas Intermediate (WTI) at $71.24 per barrel.
Today’s Events (GMT):
14:45 - Rate Decision and Press Conference – Forecast 3.75% cut from 4.25%
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