In the upcoming week, a flurry of central bank policy rate announcements from major institutions including the Federal Reserve, Bank of Japan, Reserve Bank of Australia, Bank of England, Norges Bank, and Swiss National Bank is poised to steer the course of the foreign exchange (FX) market. Economists at BBH delve into the potential ramifications of these pivotal meetings on currency trends.
The Australian dollar (AUD) is anticipated to maintain its resilience, supported by the Reserve Bank of Australia’s (RBA) steadfast commitment to a hawkish stance. Conversely, the US dollar (USD) and Treasury yields could see an upward trajectory, buoyed by the Federal Reserve’s probable adjustment of its funds rate projection, signaling a tempered approach towards monetary easing.
Conversely, the Norwegian krone (NOK) faces downside risks as market observers anticipate Norges Bank to expedite the timeline for reaching its terminal interest rate. The Swiss franc (CHF) is forecasted to experience weakness, with expectations of the Swiss National Bank (SNB) initiating easing measures.
Meanwhile, the Japanese yen (JPY) may see a slight depreciation, with the Bank of Japan (BOJ) likely to maintain its policy rate at current levels, contributing to downward pressure on the currency.
In conclusion, the British pound (GBP) is poised to encounter significant volatility amid concerns that the Bank of England’s Monetary Policy Committee (MPC) may lean towards a less hawkish stance in their voting patterns.
