US Dollar Lower on Monday Ahead of Central Bank Announcements

The US dollar is lower against most major pairs on Monday. The week will feature a host of central bank policy announcement that kick off with the Bank of Japan (BOJ) on Monday night. The Fed is not expected to tweak monetary policy on Wednesday, but the statement could end up being positive for the USD. The Bank of England (BoE) is heavily anticipated to hike by 25 basis points, but uncertainty about Brexit could make the central bank hesitate on pulling the trigger as a No Deal exit from the EU is gaining as a likely outcome. Jobs data is also scheduled to be released at the end of the week with all signs pointing to another strong U.S. non farm payrolls (NFP) report, higher wages and a lower unemployment rate in America.

The Japanese yen is trading lower ahead of the central bank announcement. The BOJ was not firmly on the market’s radar until it recently stepped up its rate of interventions in the fixed income market and hinted at a clear yield curve control policy. The possibility of a lower inflation forecast to a more reasonable 1 percent level could also be part of the central bank’s announcement.

The British pound is higher ahead of the Bank of England (BoE) rate announcement on Thursday. The central bank is expected to make Super Thursday a little bit more super with a 25 basis points rate hike.

Brexit uncertainty is keeping the pound under pressure, but the US dollar fall has allowed the GBP to move into positive territory. The Fed is not expected to announce a change in monetary policy, although a hawkish statement could support the USD on Wednesday.

The Canadian dollar appreciated versus the US on Monday. Oil prices are above $70 combined with the softness of the US dollar and NAFTA optimism have taken the loonie higher at the start of the week.

usdcad Canadian dollar graph, July 30, 2018

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza