Interest rate decisions this week will drive currency markets
Big week incoming! The long-awaited Trump-Xi Jin Ping meeting is taking place on Thursday, in an attempt to thaw tensions surrounding tariffs that has been ongoing for months now. Europe and the US have a very decisive week ahead, with interest rate decisions, alongside Japan and Australia. Hang on to your seats, things will move!
GBP: Despite today’s decent Retail Sales and Manufacturing data, GBP/EUR pulled back, ending a three-day winning streak, trading around 1.1450. The pair remains just below the 1.1550 resistance area, a one-month high reached on last Friday.
The pound is further weighed by potential easing by the BoE (possibly to be strongly signalled at this Thursday’s meeting), and concerns over UK’s fiscal outlook. UK markets are now pricing in a higher chance of a 25-basis-point rate cut in November after inflation in the UK held steady in September & the labour market showed further signs of cooling. On the other side, GBP snaps a six-day losing streak against the US Dollar (USD) on Monday, and rises to near 1.3335, driven by better Retail Sales and a weaker USD.
USD: After Thursday’s Trump-Xi meeting … and if Trump’s confidently optimistic expectations are met, the USD will gain momentum - BUT, this is against the backdrop of markets expecting the government shutdown to last for at least 2 more weeks, beyond 16th of November.
15th November could be a key date, with Scott Bessent stating that the US military will not receive funds after this date should the shutdown remain in place. Shutdown means a ‘data-blackout’ which means we may not see US third-quarter GDP this week. GDP consensus was for a reasonably strong 3.0% quarter-on-quarter annualised figure.
Wednesday evening we expect a 0.25% cut in interest rates which is fully priced in - the Press Conference will be closely watched for signals of yet more cuts, which will weigh on the USD.
EURO: EUR/USD shows a mixed technical picture, bouncing between 1.1575 and 1.1650. USD is weaker due to cooling inflation but markets will wait until Wednesday’s rate decision and press conference before driving the USD in any direction (97% probability of a 0.25% cut in US rates).
It is doubtful the ECB interest rate decision on Thursday will create any surprises. Consistent rhetoric and signalling by the ECB means no interest rate cuts are expected until Q3 2026, so Thursday’s meeting should be run-of-the-mill for President Lagarde.
This weeks data:
Tomorrow:
EUR: ECB Survey
Wednesday:
AUD: Consumer Price Data
USD: Interest Rate Decision + FOMC Press Conference
CAD: Interest Rate Decision
Thursday: Trump-Xi Meeting
JPY: Interest Rate Decision
EUR: GDP Data, Policy Decisions, German Consumer Data, ECB Press Conference
USD: GDP Data
Friday:
JPY: Consumer Data
CNY: Manufacturing Data
EUR: German Sales Data, Europe Price Data
USD: Consumer Price Data