Major Weekly Events for the Forex Market

Fed Interest Rate

Traders eagerly await the November 7th FOMC meeting, where the US central bank will likely cut interest rates. The dollar index rallies when the outlook is for a gradual pace of rate cuts. Recent US data revealed that the economy is resilient, and demand remains high. As a result, investors slashed rate cut expectations.

Initially, there was a scare when the US labor market showed deterioration. Traders moved to price in a high chance of a 50-bps rate cut in November. However, data since then has demonstrated robust demand in the labor market. Consequently, markets are pricing a 98% chance of a 25bps rate cut.

At the same time, traders will watch the tone during the meeting for clues on future moves. Recent policymaker remarks have revealed extreme caution owing to a series of upbeat reports. Some policymakers have projected only one more rate cut this year. However, the recent jobs reports showed slower job growth, with the economy adding only 12,000 jobs, well below estimates. This might push the US central bank to lower borrowing costs again in December. If policymakers signal another cut, the dollar index might fall. On the other hand, caution might propel the dollar index higher.

At the moment, the dollar is shining after a Trump win. This outcome suggests higher inflation, which might complicate the Fed’s rate-cutting cycle.

Technical Analysis

On the technical side, the dollar index has surged beyond the 104.50 resistance level. The price gapped above the 22-SMA after puncturing the 103.50 support level. The gap showed massive bullish momentum, which has propelled the index to make a new high in the uptrend. This surge came from Trump’s win. Meanwhile, the FOMC meeting might cause a pullback if policymakers are dovish.

BoE Interest Rate

The Bank of England will hold its policy meeting on the same day as the Fed. Economists believe the central bank will lower borrowing costs by 25-bps. In September, Britain recorded a low inflation rate of 1.7%, below the central bank’s target. Consequently, experts believe this will push the BoE to cut rates. However, most economists believe there will be no move in December.

Since markets have already priced a move in November, the rate cut might have little impact on GBP/USD. However, any clues about future moves might increase volatility for the pair. If policymakers signal more rate cuts this year, the pound will collapse. However, the economy is steady and underlying inflation remains high. Therefore, this might mean a cautious tone that will boost the pound.