Dollar Slips as Markets Brace for Five Central Bank Decisions in One Week

Currency markets opened the week in a holding pattern on Monday, October 26, ahead of one of the busiest central-bank calendars of the year. The dollar index, which measures the greenback against a basket of major currencies, edged down to 101.64. The euro rose 0.16% to $1.122, sterling strengthened 0.1% to $1.3385, and the Japanese yen was little changed at 156.92 per dollar. The Australian dollar fetched $0.7030, down 0.04%, while New Zealand’s kiwi traded 0.06% stronger at $0.572.

The immediate reason for the dollar’s softness was the bond market rather than any single currency story. Yields on US 10-year Treasury notes fell to 4.974%, with 30-year yields at 5.299%, both hovering near one-month lows after a recent safe-haven rally. That rally had followed elevated oil prices and a technology-led sell-off over artificial-intelligence spending worries. On Monday, Brent crude eased by more than 1% to around $115 a barrel, retreating from a six-month high after reports that Qatari mediators had travelled to Tehran to pursue regional de-escalation in coordination with the United States. As yields fall, the dollar’s yield advantage narrows, and National Australia Bank strategists argue that compression has taken momentum out of the greenback.

Five major central banks decide policy between Wednesday and Friday: New Zealand’s Reserve Bank announces first, at 01:00 GMT on Wednesday, followed by the Bank of Canada at 13:45 GMT and the US Federal Reserve at 18:00 GMT the same day, then the European Central Bank on Thursday at 13:15 GMT and the Bank of Japan around 03:00 GMT on Friday. The Fed, the ECB and the Bank of Japan are all widely expected to hold rates steady, while markets are pricing in possible increases from the Bank of Canada and New Zealand. For the Fed, markets now put the chance of an October hold at nearly 90.6%, according to CME FedWatch, with a 79.4% chance of a hike in December. The ECB is expected to keep its deposit rate at 2.50% on Thursday.

The euro’s modest gain illustrates how two forces are pulling it in opposite directions. On one side, relief that France was spared a Moody’s downgrade despite social unrest helped the single currency on Monday, even as protests over the cost of living and growing inequality turned violent for a second consecutive weekend, with around 410,000 people taking part across France, according to the Interior Ministry. On the other side, strategists at Brown Brothers Harriman note that above-target eurozone inflation and a resilient growth outlook give the ECB scope to tighten further, with swaps implying nearly 75 basis points of tightening to 3.25% over the next twelve months. The same analysts warn, however, that France’s fiscal troubles could still drive EUR/USD down to 1.1000. EUR/USD closed last week at 1.12031, after trading between 1.11803 and 1.12607, with 1.1180 now the channel floor that decides whether the decline extends.

Why this matters is that the decisions themselves may already be priced in, which shifts attention to what policymakers say about what comes next. Pepperstone’s research head has argued forward guidance could matter more than the rate calls, because officials’ signals for later meetings will determine whether markets reprice short-term rates. The data calendar reinforces that point: alongside the central banks, traders will digest Germany’s Ifo report on Monday, US consumer confidence, jobless claims and third-quarter GDP, plus PCE inflation data later in the week. For readers following these moves, our forex section explains how yields and policy expectations drive currency pairs, and the forex tools page has pip and position-size calculators for planning around volatile weeks like this one. (Not financial advice.)