There could be more volatility in this final full week of October.
Major central banks are due for pivotal policy decisions, while US earnings roll on over the coming days:
- EUR: Eurozone October PMIs
- GBP: UK October PMIs
- USD: US October PMIs
Tuesday, October 25
- EUR: Germany October IFO business climate
- GBP: BOE Chief Economist Huw Pill’s speech
- USD: US October consumer confidence
- US stocks: Q3 earnings for Alphabet, General Motors, General Electric
Wednesday, October 26
- AUD: Australia September/3Q inflation
- CAD: Bank of Canada rate decision
- US Crude: EIA weekly crude inventory report
- Meta Platforms Q3 earnings
Thursday, October 27
- CNH: China September industrial profits
- GBP: BOE Deputy Governor Sam Wood’s speech
- ECB: European Central Bank rate decision
- USD: Q3 GDP, weekly initial jobless claims
- Nasdaq 100: Q3 earnings for Amazon, Apple
Friday, October 28
- EUR: Germany October inflation & 3Q GDP, Eurozone October economic & consumer confidence
- JPY: Bank of Japan rate decision, September unemployment, October Tokyo CPI
- USD: US September PCE Deflator, personal income and spending
- S&P 500: 3Q earnings for Exxon, Chevron
- Twitter takeover deadline for Tesla CEO Elon Musk
Of the G10 major central banks who are due to hold their respective policy meetings this week, the European Central Bank appears likeliest to trigger volatility across FX markets, given the euro’s relative popularity as a traded instrument.
Markets are expecting a 90% chance that we shall see a second straight 75 basis point hike by the ECB, taking the deposit rate to 1.5%, its highest level since January 2009.
- If the ECB disappoints markets with a smaller-than-75bps hike, that should translate into further weakness for the euro, with EURUSD having languished below parity for the past month.
- Euro bears (those hoping the bloc’s currency could see more declines) may be further emboldened if ECB President Christine Lagarde also suggests on Thursday that policymakers have less bandwidth to continue hiking rates aggressively, given the economic challenges that the Eurozone faces.
Should the above scenarios materialise, euro bears may then look to the late-September lows just above 0.95 for EURUSD.
Overall, the world’s most-traded currency pair appears to be guided lower by its 50-day simple moving average (SMA).
Markets are also predicting at present a greater-than-even (62%) chance that the world’s most traded currency pair would stay below 0.990 over the next one week, barring a hawkish ECB surprise, which implies limited upside for EURUSD.
