The euro slipped against a rebounding dollar on Monday as traders prepared for decisions from the Federal Reserve, the European Central Bank and the Bank of Japan. France avoided a Moody's downgrade, but the euro gave back its early gain.
The euro fell 0.16% to $1.1185 on Monday, reversing an earlier advance as the dollar regained ground. Investors weighed easing oil prices against geopolitical risks and braced for a week of central bank announcements.
The dollar index rose 0.17% to 101.98, reversing its earlier decline.
France avoids a downgrade, with caveats
The euro had earlier risen 0.16% to $1.122, helped by relief that France was spared a Moody's downgrade despite social unrest. However, the reprieve is partial. Moody's kept its negative outlook on France, and S&P is due to review the country's rating on Nov. 27.
Fed, ECB and BoJ take centre stage
The Federal Reserve opens a two-day meeting on Tuesday and is widely expected to hold its target range at 3.75%-4.00% on Wednesday. That would follow September's first rate hike in more than three years. Futures price less than a 10% chance of a hike on Wednesday, but about 80% for December, so traders will parse Chair Kevin Warsh's press conference for hints.
The European Central Bank follows on Thursday. It is expected to leave its deposit rate at 2.50%, with ING looking to December for the next hike, as energy-driven inflation, which hit 3.7% in September, keeps policymakers on guard.
The Bank of Japan decides on Friday and is widely expected to leave rates at 1.25% after two hikes this year, though it is also expected to strike a hawkish tone.
Smaller central banks join the hiking cycle
The week also brings the first rate hikes of the cycle from smaller central banks. Swaps price about 85% odds that the Bank of Canada lifts rates to 2.50% from 2.25%, and the Reserve Bank of New Zealand is tipped to raise its cash rate to 3%. Both decisions land on Wednesday.
Source: Investing.com
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