News & Analysis

Given the busy week just gone, we have dedicated this edition of our look ahead to some of the major questions coming from the trading floor, where naturally some of the big central banks events have been a major focus. Chief amongst these was Wednesday’s Fed decision, which ultimately saw traders increasingly coming round to the idea the Fed may well end up easing much slower than other G10 central banks. This was sufficient to see the greenback end the week on the front foot, validating our modest dollar bullish call. We continue to see this as an environment where selling the dollar remains difficult. That said, it was not just the Fed in focus this week, with historic rate decisions coming from both the SNB and BoJ. The former became the first G10 central bank to begin easing policy this cycle, whilst the BoJ abandoned yield curve control and raised rates for the first time in 17 years. Combined with a rally in the dollar towards the back end of the week, this helped lead an uptick in price action across Asian FX more broadly. Beyond this, a whole raft of other central bank decisions and some key data points also helped to keep traders on their toes, and generated a number of interesting questions from on our trading floor.

A quieter calendar of events and an Easter break should give markets a further opportunity to digest all these developments and more next week. On the central bank front, focus will be on speeches from Fed, ECB, and BoC policymakers, while policy decisions are due out of Hungary, Sweden, and South Africa. Inflation will also be another theme for next week, as flash eurozone measures are released alongside the pivot PCE number from the US, hotter expectations of which caused markets to brace for a more hawkish Fed this past week. Finally, one eye for every trader will be kept on China after the yuan broke above the 7.20 handle on Friday. Whether this is a regime change by the PBoC and a resumption of volatility in Asian FX or not will be an open question for investors this weekend.

You can read the Week Ahead in full here:

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Authors: 

Simon Harvey, Head of FX Analysis

María Marcos, FX Market Analyst

Nick Rees, FX Market Analyst

 

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