FX Market View #30 Dollar is poised for a rally during a week of major announcements

Global yields have firmed this week with a majority of the currency majors paring gains against the Dollar. As opposed to the pattern that developed in the week earlier, the currencies from higher yielding currencies lost ground against the greenback. Most notably, it was the Norwegian and New Zealand currency that underperformed the most against the Dollar this week. The Euro managed to post its largest gain against the Dollar since the summer period, even consolidating before the weekend. Emerging market currencies are under pressure as risk appetite abates under a climate of rate adjustments. The market will look ahead to the meetings of four central banks as well as the US jobs report for indications of future rate hikes.
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The week began quietly with many countries observing a national holiday in celebration of the All Saints Day commemoration. Following this, the week is littered with central bank meeting from; the Bank of England, Federal Reserve, Reserve Bank of Australia and Norge’s Bank. The RBA has already confirmed its stance to reduce the bond buying program, albeit after an extension through to the middle of the Q1 next year. Norway’s central bank which was already the first high income nation to hike rates will likely extend to another hike this week. The BOE is still engaged in quantitate easing, however rates can be raised before the program ends. As for the Federal Reserve, the most likely announcement is the expectation of the beginning to the reduction in the bond purchasing program.
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Rounding off a week of key data releases and announcements is the US Jobs report on Friday. Expectations point towards significantly jobs growth, than the initial September estimate released earlier. Unemployment in the US had fallen to its lowest level in August this year since the pandemic took hold in the start of 2020. These factors all contribute in favour of a stronger Dollar in the near future. Month end position adjustments and heavier trading activity may have lent further clout to the greenback’s gains, however the technical picture supports this trend. On the possibility that we end the week with a hawkish Fed rhetoric and strong US jobs data, the Dollar will continue its current trend trading higher.