BOE to round off the major central bank focus this week
The dollar is keeping a bit more mixed post-FOMC as it pares some losses against the euro and pound from yesterday after the initial reaction. But risk currencies are maintaining their advance, keeping flatter so far today as equities are in a good mood as the Fed reiterated patience when it comes to rate hikes.
But importantly, the bond market reaction is one that is worth noting as long-end yields pull higher and the yield curve steepened slightly in the aftermath.
2-year Treasury yields are little changed and keeping around 0.47% to 0.48% while 10-year yields have moved up from 1.57% to 1.60% as we look towards the session ahead.
That is keeping yen pairs buoyed with USD/JPY up 0.2% to 114.20 currently.
I don't see this as a material turning point for dollar weakness whatsoever as the Fed pretty much delivered on expectations. It's all about the data now and how that will play into the Fed's narrative or if it will speed it up/slow it down.
The bond market reaction will also continue to keep things interesting, especially to see if the market will view the Fed as making some form of policy mistake.
But for risk trades, I'd argue it's still pretty much a buy-the-dip mentality for equities in the months ahead as even with the taper announcement, the Fed is still engaged with rather sizable QE regardless - at least for the time being.
0700 GMT - Germany September factory orders
Prior release can be found here. German industrial orders is estimated to have picked up a little after the plunge in August, but that followed a surge in new orders in July. That said, with ongoing supply and capacity constraints, it could weigh on sentiment and order books as the business outlook becomes more cloudy going into next year.
0815 GMT - Spain October services, composite PMI
0845 GMT - Italy October services, composite PMI
0850 GMT - France October final services, composite PMI
0855 GMT - Germany October final services, composite PMI
0900 GMT - Eurozone October final services, composite PMI
The final readings should reaffirm that some of the summer exuberance has faded and rising cost pressures as well as supply-side issues are beginning to weigh more heavily on the services sector and overall business activity.
0930 GMT - UK October construction PMI
Prior release can be found here. Supply and capacity constraints is expected to keep construction activity more limited, with the trend to continue into next year.
1000 GMT - Eurozone September PPI figures
Prior release can be found here. Another month, another expected increase in producer prices as cost pressures in general continue to push higher amid supply constraints.
1130 GMT - US October Challenger job cuts, layoffs
Prior release can be found here. A reminder that it is NFP week in the market. The data provides information on the number of announced corporate layoffs by industry and region and acts as a general labour market indicator.
1200 GMT - BOE announces its November monetary policy decision
Prior decision can be found here. The expectation is that the BOE will keep the bank rate unchanged but market pricing suggests that a 15 bps rate hike today wouldn't be the most surprising thing as the central bank is staying pressured to curb rising inflation. If there is a rate hike, expect a pushback on further rate expectations by the BOE as they will want to make clear that market pricing is a bit ahead of themselves. I'd argue that no immediate rate hike would be disappointing for the pound even if the BOE makes clear that they will do so either in December or February next year.
That's all for the session ahead. I wish you all the best of days to come and good luck with your trading! Stay safe out there.