Market Commentary: Currencies rangebound awaiting the week’s major events

Market Commentary: Currencies rangebound awaiting the week’s major events

Markets:

  • USD little changed
  • European equities lower; S&P 500 futures down 0.2%
  • US 10-year yields up 1.6 bps to 4.338%
  • Gold up 0.1% to $1,926.46
  • WTI crude up 0.6% to $91.30
  • Bitcoin up 2.9% to $27,194

It was a relatively quiet trading session as markets settled into the new week, adopting a cautious stance in anticipation of upcoming central bank policy decisions. Additionally, there is a significant amount of important economic data on the horizon, which is keeping investors on the sidelines for the time being.

As a result, major currencies remain within narrow trading ranges, lacking a clear catalyst for significant movement. Dollar pairs are exhibiting tight trading patterns, providing little noteworthy activity in the foreign exchange market.

In contrast, the oil market continues to show strength, with WTI crude oil prices edging above $91 per barrel. Bond yields are also holding steady, with 10-year Treasury yields on the verge of reaching their highest levels since 2007.

Equity markets, however, are showing some uncertainty as they approach the US opening, following a relatively calm European session. The ongoing UAW strike remains a factor affecting US stocks, adding an element of caution as the new week unfolds.

The central bank bonanza heats up this week

This week’s economic calendar is filled with significant events, although it begins rather uneventfully today. The spotlight is on major central banks, starting with the Federal Reserve, followed by the Swiss National Bank (SNB) and the Bank of England (BOE), and concluding with the Bank of Japan (BOJ) on Friday.

The SNB and BOE are expected to implement a 25 basis point (bps) rate hike each, while the Fed is anticipated to maintain its current stance and stay on the sidelines. As for the BOJ, there are no expectations for policy changes, but they have a history of surprising the markets.

Governor Ueda’s recent comments about a “quiet exit” will likely influence the yen’s movements in response to the BOJ’s decision and communication this week. If it turns out that Ueda was merely making provocative remarks over the weekend, traders may react strongly.

Given that we won’t reach the Fed’s meeting until Wednesday, the next two days might see relatively subdued market activity before things become more active. To cap off the week, euro area PMI data on Friday could potentially overshadow the European Central Bank (ECB) in terms of its impact on the euro currency this month.

Author: Jacky.T

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