Dip in the dollar takes a breather with Fed in focus
SPY•The dollar’s decline paused as investors looked ahead to central bank meetings next week, with hawkish holds expected in Japan, the United States and Europe. Sterling, the Australian dollar, the New Zealand dollar and the Canadian dollar held near recent highs, while the euro and yen traded in tight ranges.
1. Dollar moves pause
The dollar’s decline paused on Thursday ahead of next week’s central bank meetings. Recent gains in sterling and the currencies of Canada, Australia and New Zealand suggest some dollar bets have been pared, though moves were slight. The Australian dollar was at $0.7025, the New Zealand dollar at $0.5709 and the Canadian dollar near C$1.4032 per dollar; sterling held at $1.33955 after reaching a one-month high of $1.3409 earlier in the week.
2. Rate decisions ahead
The Bank of Canada is expected to hike next week, while markets expect the European Central Bank to hold its benchmark rate at 2.5%, with a hike priced in before year-end. The Federal Reserve is seen holding its 3.75%-4% rate range in October and hiking in December; Japan is also expected to hold, with its next hike to 1.5% anticipated early next year. The yen traded around 158 per dollar, while the euro stayed above $1.12. Spectra Markets president Brent Donnelly described the euro market as being in a “stalemate,” with negative news balanced by market positioning.
