Major currencies exhibited limited fluctuations on Monday, marking the onset of a week characterised by significant central bank deliberations and corporate earnings reports. Concurrently, a decline in oil prices and Treasury yields exerted downward pressure on the dollar. Oil prices have softened, with Brent crude futures declining over 1% to approximately $115 a barrel after reaching a six-month peak last week. This movement follows a Reuters report indicating that Qatari mediators were in Tehran on Sunday, engaging in efforts to de-escalate regional tensions in collaboration with the US.
Meanwhile, US Treasuries largely maintained their gains from a recent safe-haven rally, as elevated oil prices sustained inflation concerns and a tech-led selloff driven by apprehensions regarding AI prompted a shift away from risk assets. Yields on US 10-year notes recently decreased to 4.974%, while those on 30-year notes stood at 5.299%, remaining close to one-month lows. “For the time being, it seems to point to the US bond market being in the driving seat for broader dollar performance,” said Ray Attrill. “I think the market is sort of responding to the fall we’ve seen in Treasury yields and the fact that yield differentials between the US and other kind of G10 majors are compressing. I think that’s taken a little bit of the heat out of the US dollar.”
The euro appreciated by 0.16% against the US dollar, reaching $1.122, bolstered by the reassurance that France avoided a downgrade from Moody’s in light of ongoing social unrest. Sterling appreciated by 0.1% to $1.3385.
The dollar index, which measures the US currency against a basket of peers, was a shade weaker at 101.64.
The Australian dollar fetched $0.7030, down 0.04%, while the kiwi traded 0.06% stronger at $0.572. The Japanese yen exhibited relative stability, with its most recent value recorded at 156.920 per dollar. Five major central banks will take center stage later in the week, with the US Federal Reserve, the European Central Bank, and the Bank of Japan anticipated to maintain their current interest rates. Markets are factoring in possible increases from the Bank of Canada and the Reserve Bank of New Zealand.
“Forward guidance could matter more than the decisions themselves,” said Chris Weston, head of research at Pepperstone, in a note. “The decisions themselves may be largely discounted. The real issue that could move the dial in short-term rates and by extension is how policymakers shape expectations for subsequent meetings and whether markets need to reprice the forward rates curve.” Meanwhile, a packed US economic calendar will include an October consumer confidence report, a PCE price index, and jobless claims, which could provide additional clues on the outlook for Fed policy.
