Central Bank Decisions: The RBA, BoE, and Fed are set to announce rate decisions this week, driving AUD, GBP, and USD movements and shaping investor expectations on monetary policy.
US Elections: The US elections this week could trigger major market swings. Political shifts may alter fiscal and regulatory policies, directly affecting USD and risk sentiment.
Labor Market Data: Employment figures from New Zealand, the US, and Canada will offer insights into economic momentum, impacting NZD, USD, and CAD. Traders are on alert for surprises that could shift central bank expectations.
What Now?
The intersection of central bank decisions and the US elections makes for a potentially explosive week ahead. Traders will need to stay nimble, as these macro events are poised to have profound impacts on currency valuations and market sentiment.
RBA Decision (Tuesday): The RBA is expected to hold rates steady at 4.35%. Any divergence from this expectation could prompt significant AUD volatility. A dovish signal from the RBA would likely weigh on AUD, especially against the backdrop of weaker global growth. However, should the RBA take a surprisingly hawkish stance, the AUD could catch a bid, bolstered by the favorable rate differential.
BoE Decision (Thursday): The Bank of England is set to leave its rate unchanged at 5.00%, prioritizing high rates to combat persistent inflation. Governor Bailey’s commentary will be crucial, as the BoE aims to prevent inflation from becoming entrenched despite weak growth. A hawkish tone could provide a needed boost to GBP/USD, while dovish remarks would likely exacerbate the pound’s recent slide.
Fed Decision (Thursday): The Fed is expected to cut rates by 25 basis points to 4.75%. Recent GDP growth has slowed, and labor market conditions are showing signs of cooling, setting expectations for more accommodative Fed policy. According to the CME FedWatch Tool, there is a significant probability of another rate cut, which traders are closely monitoring. Market participants will be laser-focused on any guidance regarding future tightening or easing cycles. A dovish outlook could push bond yields lower and soften USD, whereas hawkish hints would reinforce the USD’s strength and drive yields higher.
US Election Impact: The latest polls show a razor-thin margin between candidates, adding to the volatility. Historically, tight elections have prompted significant USD swings as risk premiums get repriced. If the election results are delayed or contested, expect the USD to come under pressure, with a corresponding surge in safe-haven demand for JPY and CHF. Conversely, a decisive and market-friendly outcome could stabilize risk appetite and buoy the USD, particularly if fiscal policy expectations pivot towards growth. A pro-growth fiscal package could see the USD catch a tailwind on expectations of increased government expenditure, while a less favorable outcome may keep USD on the back foot amid persistent uncertainty.
Central bank meetings combined with the election will establish the prevailing trend: dovish surprises from the BoE or Fed may pressure bond yields downward, hitting USD performance and benefiting risk-sensitive currencies like EUR and JPY.
Market Events and Announcements
The times below are GMT +2.
Monday, November 4, 2024:
No high impact events are scheduled.
Tuesday, November 5, 2024:
5:30 AM – AUD: Cash Rate and RBA Monetary Policy Statement: The RBA will announce its rate decision, expected to remain unchanged at 4.35%. The accompanying statement will provide key insights into any shifts in their outlook.
5:00 PM – USD: ISM Services PMI: A major gauge of the US services sector’s health. A robust figure could lift the USD, signaling resilience in the economy.
All Day – USD: Presidential and Congressional Elections: The outcome will be pivotal, with potential for substantial volatility across markets. A clear winner might stabilize USD, while uncertainty could inject volatility.
11:45 PM – NZD: Employment Change q/q and Unemployment Rate: These metrics are crucial for evaluating New Zealand’s labor market. Strong data could support NZD, whereas weaker results could trigger a selloff.
Wednesday, November 6, 2024:
No significant data release.
Thursday, November 7, 2024:
2:00 PM – GBP: BoE Monetary Policy Report, MPC Votes, and Official Bank Rate: The BoE will announce its rate decision. The market will scrutinize the voting breakdown and any changes in language within the Monetary Policy Report for clues on the path forward.
3:30 PM – USD: Unemployment Claims: A leading indicator of labor market strength in the US. Lower claims numbers would reinforce a tight labor market, underpinning the USD.
9:00 PM – USD: Federal Funds Rate and FOMC Statement: Markets anticipate no rate change, but the FOMC statement will be key in shaping rate expectations. Hawkish language could lend strength to the dollar.
9:30 PM – USD: FOMC Press Conference: The Fed Chair’s commentary will provide essential color on the Fed’s view of inflation and labor market dynamics. Expect significant moves if there are surprises.
Friday, November 8, 2024:
3:30 PM – CAD: Employment Change and Unemployment Rate: Canadian labor market data is expected to directly influence CAD direction. Strong numbers will likely support CAD, while disappointing data could weaken it.
Market Insights: Key Charts to Watch
Chart 1: GBP/USD – Weekly Chart
GBP/USD has been in a downtrend for five weeks straight, currently testing key support at the Kijun-sen near the 127.20% Fibonacci extension. This level coincides with an uptrend line from mid-2023, marking it as a make-or-break juncture for the pair. The confluence of the US Presidential election and the BoE and Fed decisions makes the upcoming week particularly crucial for GBP/USD.
Main Scenario:
A break below 1.28839 (127.20% Fibonacci) could open the door for further declines to 1.27344 (161.80% Fibonacci), 1.25693 (200% Fibonacci), and potentially 1.24517 (227.20% Fibonacci) if the Kumo cloud fails to hold. The BoE’s rate decision and tone will be instrumental in shaping whether the pound can muster a recovery or remain under pressure.
Alternative Scenario:
If the Kijun-sen holds firm, a rally towards 1.30015 could materialize. Should the BoE strike a hawkish tone, GBP/USD could push up to 1.31386 (Tenkan-sen), which might negate the recent bearish sentiment.
Impactful Events:
The BoE decision on Thursday remains the primary driver for GBP/USD. If the BoE holds rates unchanged and the Fed cuts by 25 bps, GBP/USD could see significant upward momentum due to the widening rate differential favoring GBP. Any surprises in policy or shifts in guidance could trigger sharp moves.
Key Levels:
Support: 1.28839, 1.27344, 1.25693, 1.24517
Resistance: 1.30015, 1.31386
Chart 2: US 10-Year Treasury Yield (US10Y) – Weekly Chart
The US 10-year yield is testing the Kumo cloud resistance while remaining within a descending channel. This level is a key inflection point for broader bond markets. Back in 2016, when Donald Trump won the presidency, the 10-year yield surged sharply on expectations of fiscal stimulus, tax cuts, and infrastructure spending—boosting inflation expectations and bond yields. The current election could yield a similar market reaction, contingent on the fiscal outlook presented by the winner.
Main Scenario:
A successful break above the Kumo cloud, crossing 4.35%, could see the yield pushing higher towards 4.5%, 4.75%, and even 5.0%. This would likely coincide with USD strength, especially if the Fed maintains a hawkish bias.
Alternative Scenario:
Should the yield fail at the Kumo, a drop below 4.1% could indicate renewed downside pressure. A dovish Fed, combined with political uncertainty, could ease financial conditions and weigh on yields.
Impactful Events:
The FOMC meeting and US elections are critical for bond yields this week. A clear election outcome that supports growth-oriented policies could lift yields, while an uncertain or contested result might prompt renewed downward pressure.
Key Levels:
Resistance: 4.35%, 4.5%, 4.75%, 5.0%
Support: 4.1%, 3.9%
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