Forecast for next week: US presidential election overshadows Fed decision

Last week, the US dollar consolidated at familiar levels, although it is about to break four consecutive weeks of gains ahead of a busy schedule. The narrative in financial markets has been the same for the past six or seven weeks, with investors keeping an eye on the US presidential election. US President Joe Biden’s efforts to reach a ceasefire in the Middle East failed, keeping high geopolitical tensions. Meanwhile, the odds of a scenario in which the Federal Reserve achieves a soft landing increased.

The US Dollar Index (DXY) consolidated and was on the verge of posting minimal losses, although it held on to the 104.00 figure for the second consecutive week, and failed to overcome a resistance line around 104.50. The US presidential election begins on November 4, but initial results could be released on November 5. That same day, the agenda will be packed with the release of the S&P Global Composite PMI, which will be overshadowed by the ISM Services PMI. The Federal Reserve’s monetary policy decision begins on November 6, although it will end the next day, followed by the usual press conference by Fed Chairman Jerome Powell. Initial jobless claims will be released on November 7, ahead of the Federal Open Market Committee (FOMC) decision, followed by the University of Michigan’s consumer sentiment survey on November 8.

EUR/USD consolidated during the week and is about to end the week up 0.30%. However, a close below 1.0850 would keep bears hopeful of pushing the shared currency lower amid risks of a hawkish retreat from Fed Chair Jerome Powell. Several preliminary HCOB PMIs in Germany, France and across the Eurozone bloc on November 4 will give clues on economic growth. EU investor confidence will be revealed on the same day, followed by the Eurogroup meeting on November 5. HCOB services PMIs for the bloc and EU countries will be announced on November 6, along with prices paid by producers in the euro zone. Retail sales will be released on November 7, followed by the EU summit.

In the UK, GBP/USD extended its weekly losing streak to five, supported by the autumn budget presented by chancellor Rachel Reeves. The British Pound was punished by the markets and is about to end the week closer to 1.2900 than 1.3000. The budget aimed at stimulating the economy could lead to a rise in inflation at a time when the Bank of England is battling high prices. The agenda will be light, headlined by the BoE’s monetary policy decision on November 7, followed by Governor Andrew Bailey’s speech.

USD/JPY remained subdued, capped around 151.70/153.90 after Bank of Japan (BoJ) Governor Kazuo Ueda and the board kept rates unchanged at 0.25%. Next week’s agenda will be light, with the release of the BoJ meeting minutes on November 5 and the cash job earnings report on November 6.

On the AUD/USD front, the pair broke two days of gains, losing over 0.40% daily and 0.70% weekly. Next week, the calendar begins with the release of October inflation figures on November 3, followed by the Reserve Bank of Australia’s monetary policy decision on November 4. The next day, November 5, the AIG Industry Index is expected, followed by the trade balance on November 6.

Anticipating Economic Outlook: Voices on the Horizon

• November 4: Press conference by RBA Governor Michele Bullock and Elderson of the ECB.
• November 5: ECB President Lagarde and member Isabel Schnabel.
• November 6: Lagarde, De Guindos and Joachim Nagel of the ECB will cross the wires.
• November 7: BoE post-monetary policy decision press conferences, Bailey and Fed Chairman Powell. Lane and Elderson of the ECB.
• November 8: Cipollone of the ECB, Pill of the BoE and Bowman of the Fed will cross the cables.

Central Banks: Upcoming Meetings to Shape Monetary Policies

• The RBA policy decision on November 5.
• The decisions of the National Bank of Poland, the Riksbank and the Bank of Norway on November 6.
• The BoE and the Federal Reserve will reveal their rate decision on November 7.