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A majority of the G7 nations will see their respective central banks announce rate decisions this week.
Currency markets got off to a steady start to the week, boosted by trade optimism and looming interest rate meetings for four of the G7’s five central banks.
The Federal Reserve, the European Central Bank, the Bank of Japan and the Bank of Canada will all make their latest monetary policy decisions before the week is out. Markets are expecting at least two of those meetings to result in cuts, with the Federal Reserve’s decision in particular drawing close interest from across the world.
Neither that key decision nor the ongoing government shutdown could stop President Trump from jetting off to Asia this week. The president is in Japan first, where he will meet with new prime minister Sanae Takaichi before moving on to his ultimate goal of China.
Of course, the other main theme of this week is set to be trade. News that the US and China had agreed to the framework of a deal ahead of the meeting between Trump and Xi Jinping added to the confident mood on Monday. Any slip up in those high-stakes discussions could prove destabilising to the constructive tone that marked the start to this week.
Argentina’s peso was arguably the world’s best performing currency on Monday, after a crucial victory for Javier Milei’s La Libertad Avanza party in the midterm elections. The peso strengthened by almost ten per cent against the US dollar, having only recently seemed destined for a currency devaluation.
Yesterday was a worse day for the Japanese yen, which came under pressure ahead of Thursday’s interest rate decision. Currency markets expect rates the Bank of Japan to announce another hold. More interesting could be their commentary on the policy implications of the new prime minister.
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GBP: Buoyant mood carries over
A happier end to last week for the UK carried over into the start of this week. Truth be told, there isn’t much fresh data for us to sink our teeth into this time around. Instead, sterling will look to rival central banks for direction and will of course be vulnerable to any fresh political bombshells.
GBP/USD: the past year
EUR: Hopeful of improvement
Germany’s Ifo business climate survey came in at 88.4 in October, beating both forecasts and last month’s 87.7. The assessment of current conditions actually worsened month-on-month, yet businesses were hopeful that the economy would pick up in the next 12 months.
GBP/EUR: the past year
USD: Deficits to lead to massive debt
Should current spending levels be maintained, the IMF projected that US debt ratios would reach 143% of GDP by 2030. That would be far higher than the likes of Italy and Greece endured after the financial crisis, and reflects annual deficits of over 7%.
EUR/USD: the past year
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