Global Currencies on Edge Ahead of Central Bank Decisions and U.S. Data

Global currencies were largely rangebound on Monday as investors prepared for a critical week of central bank decisions and major U.S. economic releases. The dollar held near two-month lows, while the euro and British pound remained steady, with markets focused on interest rate expectations in major economies heading into the new year.

The Japanese yen showed little movement after a survey revealed that business sentiment among Japan’s largest manufacturers hit a four-year high. The results reinforced expectations that the Bank of Japan (BOJ) may raise rates later this week, with analysts forecasting a gradual path of 25 basis point increases until policy rates reach 1%. Investors are paying close attention to guidance from BOJ Governor Kazuo Ueda for hints on future hikes.

In Europe, attention is turning to the Bank of England (BoE) and the European Central Bank (ECB). Sterling eased slightly to $1.3359, with markets largely pricing in a potential BoE rate cut amid slowing inflation. Meanwhile, the euro dipped 0.09% to $1.1730 as the ECB is expected to hold rates steady, although speculation is growing about a possible hike in 2026. Analysts note that upcoming UK inflation data could influence BoE decisions.

Across the Atlantic, U.S. investors are set to receive delayed economic data following the government shutdown. November’s jobs report and inflation figures later this week are expected to provide a clearer picture of the world’s largest economy, influencing the dollar and shaping global market expectations. Following a recent 25-basis-point cut by the Federal Reserve, Chair Jerome Powell signaled that further rate reductions are unlikely in the short term.

Other currencies showed minor fluctuations, with the Australian dollar down to $0.6647 and the New Zealand dollar slightly higher at $0.5807. Meanwhile, political developments in the U.S. have added an extra layer of uncertainty, as President Trump weighs candidates for the next Federal Reserve chair, a move that could shape monetary policy in 2026.

source: cnbc