Dollar Continues to Decline Ahead of Minutes from the Fed
GBP
The GBP/USD increased by 0.2% to 1.2532, nearing a two-month high. GBP/EUR is presently at 1.1455 (interbank).
Yesterday, UK Prime Minister Rishi Sunak pledged to reduce debt and lower taxes to stimulate the UK economy further. Sunak mentioned today, "Now that inflation is halved, we can shift our focus to tax reduction… We will incentivize work by cutting taxes and reforming our benefits system to ensure that work is always rewarding."
BoE Governor Bailey, along with other BOE officials, is scheduled to speak later in the session. Bailey has previously emphasized the necessity for the British central bank to "see the job through" in bringing down the inflation rate.
U.K. inflation, despite experiencing the largest drop in the annual CPI rate from one month to the next since April 1992 in October, remains one of the highest in the developed world.
Events Today (GMT):
10:00 - BoE Gov Bailey Speaks
13:00 - Inflation Report Hearings
EUR
In Europe, the EUR/USD rose by 0.2% to 1.0955, reaching its highest level since mid-August, despite weak economic growth in the eurozone.
There are no significant corporate earnings to focus on in Europe during this session, leading to limited activity as investors await speeches from various European Central Bank officials, including President Christine Lagarde.
Eurozone inflation dropped significantly to 2.9% in October, down from 4.3% the previous month. However, ECB members have been quick to dismiss speculation about imminent rate cuts after the central bank concluded an unprecedented streak of 10 consecutive interest rate hikes last month.
The Governor of the Bank of Spain, Pablo Hernandez de Cos, stated on Monday that it was "premature" to discuss the possibility of interest rate cuts, while his French counterpart Francois Villeroy de Galhau mentioned that rates have likely plateaued for the next few quarters.
Events Today (GMT):
16:00 - ECB President Lagarde Speaks
USD
The Dollar Index, which tracks the U.S. dollar against a basket of six other currencies, fell by 0.2% to 103.135, reaching levels last observed in late August.
Following a series of soft labour market and inflation readings, traders speculate that the Federal Reserve has concluded its rate-hiking cycle, with potential cuts in the next steps. The markets have now priced in a 30% chance that the Fed could begin reducing rates as early as March 2024.
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Today, investors will focus on the minutes of the U.S. Federal Reserve's recent meeting, set to be released later in the day, for insights into the direction of rates in the world's largest economy.
While the Fed was widely expected to keep rates unchanged in December, there is growing speculation that the U.S. central bank may initiate interest rate cuts by the summer of 2024.
Events Today (GMT):
15:00 - Existing Home Sales (Oct) - 3.90M (forecast)
19:00 - FOMC Meeting Minutes
CAD
USD/CAD has retraced from its recent gains, currently trading at 1.3721 (interbank) in today’s session.
The Canadian Dollar has gained support against the U.S. dollar due to higher Crude Oil prices.
Canada's inflation (CPI) data is set to be released today.
The year-on-year inflation rate in October is expected to have decreased to 3.2% from the previous reading of 3.8%.
A decline in inflation could give the Bank of Canada (BoC) leeway to maintain its target for the overnight rate at 5.0% during its December meeting, especially as the central bank has signaled that rate decisions will be influenced by economic indicators.
Events Today (GMT):
13:30 - Core CPI (Oct)
13:30 - CPI (Oct) - 0.10% (forecast)
13:30 - New Housing Price Index (Oct) - 0.00% (forecast)
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