Continuing the theme of recent weeks, conflict in the Middle East provided the dominant catalyst for FX price action over the week just gone. As of writing late on Friday, the dollar enters the weekend having chalked up a net gain, with a lack of progress in peace negotiations between the US and Iran pushing up oil prices and weighing on risk sentiment. With all eyes on the talks in Pakistan, other data catalysts were largely overshadowed, with CPI data for Canada, the UK, and Japan having little discernible market impact. Assuming no breakthrough before Monday, we expect this pattern to hold again in the week ahead.

Still, the coming week sees a number of major central banks delivering rate decisions that we suspect markets will find harder to ignore. The BoJ, BoC, Fed, BoE, and ECB are all due to hold policy meetings. All are widely expected to leave rates on hold. But for traders, it is forward guidance that will be key, and here we could see notable dispersion. We think markets have been too aggressive in pricing in rate hikes for the ECB and BoE in particular, and look for pushback from policymakers in the week ahead to weigh on the euro and sterling. If realised, that should help support the dollar on a relative basis, keeping the greenback on the front foot, albeit still very much at the mercy of ongoing peace negotiations.

You can read the Week Ahead in full here:

DOWNLOAD THE FULL REPORT

Authors:

Nick Rees, Head of Macro Research

Barry van der Laan, Senior FX Market Strategist

Disclaimer

This information has been prepared by Monex International Markets plc, part of Monex S.A.P.I. de C.V. (“Monex”). The material is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is, or should be considered to be, financial, investment or other advice on which reliance should be placed. No representation or warranty is given as to the accuracy or completeness of this information. All entities in the “Monex” group of companies are regulated for different products and services within the jurisdictions in which they operate. Details of the different entities can be found here. Details of the respective entities’ regulated status and available products and services can then be found on the relevant links to the individual jurisdictions’ website.