January 28, 2023

Rate Hikes: Forex market cautious ahead of BOJ, BoE, FOMC meetings

LQDFX blog: Rate Hikes: Forex market cautious ahead of BOJ, BoE, FOMC meetings

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This is a heavyweight week for currency markets as traders are cautious ahead of central banks’ policy meetings. Bank of Japan, Bank of England and FOMC will hold their monetary policy meetings and decide on rate hikes.

The ECB’s dovish comments last week that rates would remain low through the 2019 summer hurt the euro.

Currencies are mostly traded flat as traders are not willing to risk and enter big positions. So, what to expect this week? Which are the great weekly Forex news?

Tuesday: Bank of Japan will conclude its two-day meeting. Markets expect to see whether the BOJ is about to take steps towards a more sustainable massive stimulus programme. The basic question is whether the Japanese central bank will signal at future policy revision. Fed rate hikes may be a key factor for BOJ monetary policy revision.

Wednesday: FED (FOMC) will decide whether it will hike in September by another 0.25%, the third one this year. Experts expect hawkish rhetoric to calm down traders following Trump’s comments that a strong dollar “puts us at a disadvantage”.

Thursday: Traders expect that ‘The Old Lady of Threadneedle Street’ will raise interests to 0.75% from 0.50%. However, ongoing concerns about Brexit could keep GBPUSD from climbing above the psychologically-important 1.32 level.

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Forex Market ahead of Rate Hikes

In general Forex traders’ moves were tiny on Monday ahead of Central Banks’ policy meetings.

The Dollar traded flat against its major traded rivals, while it inched up 0.1% against the Yen.

The Australian dollar weakened 0.1% to $0.7397, while the Canadian dollar dropped 0.1% to $1.3065.

The common currency slightly increased ahead of German Consumer Price Index. Last week, the Euro dropped following ECB President’s comments that no rate hikes are coming for a year or more.

The Sterling inched up on Monday, but the gains were capped by traders’ concerns. Although expectations about a rate hike by BoE are high, Brexit negotiations standstill obscures the traders’ appetite. The pound traded flat against the common currency.

Sources: Reuters, CNN money, the guardian

PLEASE NOTE The information above is not investment advice.