Dollar Maintains Strength While the Euro Continues to Weaken
GBP
GBP/USD is currently at 1.2620 (interbank) after hitting a six-month low last week, while GBP/EUR is trading at 1.1944, retreating from a two-year high of 1.21 seen last Monday.
The Bank of England (BoE) delivered its second 25-basis-point rate cut earlier this month, signalling that further reductions are likely to be gradual as it assesses inflation pressures, particularly from the new government's first budget.
This week, all eyes are on the UK’s October Consumer Price Index (CPI) data due on Wednesday, with forecasts suggesting annual inflation could rise to 2.2%, above the BoE’s 2% target, after dropping to 1.7% in September.
BoE Governor Andrew Bailey and other officials are set to appear before the Treasury Committee on Tuesday to provide insights on inflation and monetary policy.
October retail sales data and PMI reports for manufacturing and services sectors will also be closely monitored on Friday.
No significant events are scheduled for today
EUR
EUR/USD is trading lower at 1.0548 (interbank), close to its lowest level in a year, as political uncertainty in Germany and fears of U.S. tariffs under Trump’s new administration weigh on the euro.
This week, the focus will shift to flash PMI data for the manufacturing and services sectors across major European economies. Eurozone manufacturing PMI in October was revised to 46.0, signalling a slower pace of decline, though it marked the 28th consecutive month of contraction, the longest in history. Forecasts suggest no change for November.
Services PMI is also expected to remain steady at 51.6, indicating marginal growth.
Today, ECB President Christine Lagarde is due to speak in Paris, where traders will watch for her comments on U.S. trade policies and any hints about the size of potential interest rate cuts in December.
Today’s Events (GMT):
08:15 - ECB's De Guindos Speaks
10:00 - Trade Balance (Sep) – Forecast: 7.9B
13:00 - ECB's Lane Speaks
18:30 - ECB President Lagarde Speaks
USD
The dollar index, which measures U.S. dollar against a basket of other major currencies, is currently trading at 106.48 after reaching a one-year high of 107.07 on Friday. It gained 1.6% last week, marking increases in six of the past seven weeks.
The dollar’s rally has coincided with a 70-basis-point rise in 10-year Treasury yields since October, as higher yields make U.S. bonds increasingly attractive.
The Federal Reserve’s hawkish stance on interest rates, as reiterated by Chair Jerome Powell, continues to lend support to the dollar.
The economic calendar for the week includes updates on the housing market, such as reports on building permits, housing starts, and existing home sales. Weekly jobless claims and PMI data on Friday will offer further clues about business activity amid concerns over Trump’s proposed trade tariffs. Several Federal Reserve members, including Presidents Austan Goolsbee, Jeffrey Schmid, and Beth Hammack, are also set to speak this week.
No significant events are scheduled for today
CAD
USD/CAD is trading at 1.4087 (interbank), around a four-year high of 1.4105 reached last week.
The Canadian dollar remains under pressure due to expectations that the BoC will accelerate rate cuts in response to subdued inflation and a slowing economy.
Canada Post workers launched a strike on Friday after failing to secure a new contract, with implications for the busy holiday season. The government recently resolved labour disputes at major ports via binding arbitration, raising expectations for similar action in this case.
Statistics Canada will release October inflation data on Tuesday, with forecasts pointing to subdued price growth. September’s inflation rate was 1.6%, the slowest since February 2021 and below the BoC’s 2% target.
Oil prices have risen as fighting between Russia and Ukraine escalated over the weekend, with Brent crude at $71.35 per barrel and West Texas Intermediate crude (WTI) at $67.19 per barrel.
No significant events are scheduled for today
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