Central banks take center stage as traders brace for a pivotal week in FX and rates
A lull to start the week gives way to a heavy slate of central bank decisions and jobs data that could jolt FX volatility, reset front-end yields, and reprice rate-cut timelines across G10.
What’s on the radar
Key points for traders
- RBA expected to hold rates; focus on whether guidance tilts dovish as domestic inflation drivers narrow.
- U.S. ADP and JOLTS to update the labor-demand picture; consensus sees October job openings near 7.14 million.
- BoJ Governor Ueda speaks on inflation, rates, stability, and the yen at FT’s Global Boardroom.
- BoC seen on hold after two cuts; recent GDP and jobs stabilization complicate the easing path.
- FOMC meeting: a 25 bps cut is seen as likely but contentious; new forecasts will steer 2025–2026 rate expectations.
- Australia’s jobs report, the SNB decision, U.S. jobless claims, and UK GDP round out a dense Thursday–Friday macro run.
Quiet Monday before a policy-heavy week
With no major data Monday, liquidity could be patchy and ranges tight ahead of risk events. Volatility typically builds into multi-central-bank weeks, with FX positioning sensitive to front-end rate repricing and any surprises in labor indicators.
RBA: steady policy, softening inflation pulse
The Reserve Bank of Australia is widely expected to keep rates unchanged. While the latest monthly CPI ran hotter than forecasts, the strongest price gains appear concentrated in categories shaped by government policy rather than market dynamics. That nuance supports the case for patience as the broader economy shows signs of regaining momentum in Q3 National Accounts. Markets still lean toward inflation moderation next year, leaving room for the RBA to consider two 25 bps cuts if disinflation holds. For AUD, guidance will matter more than the hold itself: a nod to waning underlying pressures could soften the currency, particularly versus USD and NZD.
U.S. labor pulse: ADP and JOLTS in focus
The JOLTS releases for September and October should clarify the cooling trend in labor demand. The October consensus sits near 7.14 million openings. Two gauges stand out for dollar traders:
– The openings-to-unemployed ratio, which slipped below 1.0 in August. Another drop would underline a looser jobs market and ease wage-pressure concerns.
– The quit rate, steady at 1.9% this year. A meaningful decline would signal rising worker caution and a weaker bargaining backdrop.
A softer labor-demand mix would skew U.S. yields lower at the front end and weigh on the dollar into the FOMC.
FOMC: a finely balanced cut and a market-forecasts gap
The Fed is seen leaning toward a 25 bps cut, though divisions on the Committee make it a close call. Inflation concerns persist, with tariff-linked price pressures complicating the disinflation path. Still, labor-market softness has nudged odds toward easing, a view echoed by several policymakers. Updated Fed projections will be pivotal. Some analysts anticipate only one additional cut penciled in for 2026, while futures markets still price two to three cuts over the next year. Traders will also watch for any hints about leadership prospects beyond 2025—chatter around a 2026 chair nomination could inject an extra dose of uncertainty into early-year policy expectations. For USD, a dovish dot plot or weaker labor inputs would favor a softer profile; a hawkish skew could re-steepen the curve and lift the greenback.
BoC: pause, with growth stabilizing
After two consecutive cuts in September and October, the Bank of Canada is expected to hold. Recent data show a firmer backdrop: GDP beat expectations and November employment rose by 54,000, with the unemployment rate easing to 6.5% from 7.1%. Household spending has also benefited from earlier easing. Inflation remains above target, however, and could face renewed pressure next year from consumer and fiscal drivers. Markets are not factoring additional cuts extending into 2026, underscoring the BoC’s higher bar for further easing. USD/CAD may stay headline-driven this week with sensitivity to both BoC tone and U.S. labor data.
SNB: patient amid softer inflation
The Swiss National Bank is expected to keep rates unchanged even as inflation undershoots. Price growth is projected to hover around zero for a stretch, and a 25 bps cut to –0.25% in March next year is conceivable if disinflation persists—implying a brief return to negative rates. That said, the bar for such a move is high, and officials are likely to exhaust other options first. For CHF, policy patience coupled with low inflation keeps carry unfavorable, but haven demand can still dominate on risk-off days.
Australia jobs: normalization beneath the surface
Consensus sees employment up 20.3k (prior 42.2k) with unemployment nudging to 4.4% from 4.3%. Despite an upside surprise in October, the three-month job-creation trend has cooled to roughly a 1.5% annualized pace. The Q3 Labor Account points to rotation: sectors turbocharged during the care-sector hiring boom are normalizing, while market-oriented industries gradually re-accelerate. Participation holds near 67.0%. Youth unemployment volatility has led the broader rise now emerging across the adult workforce. A softer print would bolster RBA-dovish pricing and weigh on AUD crosses.
UK GDP: supply shock fading
UK manufacturing output fell in September after a major cyberattack forced a temporary production halt at Jaguar Land Rover. With the disruption resolved, October GDP is expected to improve by 0.1% m/m after a –0.1% decline. For sterling, the growth pulse matters at the margin, but broader GBP direction remains tethered to global risk appetite and U.S. rate moves.
BoJ watch: Ueda’s remarks on policy and the yen
Bank of Japan Governor Kazuo Ueda will discuss inflation, interest rates, financial stability, and the yen’s external value in London. Any hints on the policy normalization timeline or tolerance for yen weakness could ripple through USD/JPY and JGBs. Given the sensitivity of yen pairs to rate differentials, even subtle shifts in rhetoric can spur outsized FX moves.
Market implications
– Rates: Front-end yields face a binary week—softer U.S. labor data and a dovish FOMC would flatten cuts into 2025, while firmer data or hawkish guidance could reprice higher-for-longer.
– FX: AUD and CAD hinge on central bank tone and domestic jobs/growth beats or misses; USD direction will be set by JOLTS/FOMC; CHF remains a low-carry haven; GBP watches GDP stabilization but tracks global beta.
– Risk: Equities and credit may lean risk-on if policy guidance confirms a controlled easing cycle; a hawkish surprise would tighten financial conditions and lift the dollar.
FAQ
What are the most market-moving events this week?
The RBA, BoC, SNB, and FOMC decisions, plus U.S. ADP and JOLTS, Australia’s labor report, U.S. weekly claims, and UK GDP. BoJ Governor Ueda’s remarks could also sway yen pairs.
What could move AUD the most?
RBA guidance and Australia’s jobs data. A softer labor print or dovish tilt from the RBA would typically pressure AUD, especially against USD and NZD.
How might JOLTS affect the dollar?
Another decline in the openings-to-unemployed ratio and a lower quit rate would point to cooling labor demand, favoring lower front-end yields and a softer USD into the FOMC.
Is the Fed likely to cut rates?
Markets see a 25 bps cut as likely but contentious. Updated Fed projections will be critical for how many cuts investors price for 2025–2026.
What is the Bank of Canada expected to do?
Hold rates after two cuts. Canada’s data have stabilized, which raises the bar for additional easing even as inflation remains above 2%.
Could the SNB return to negative rates?
It’s possible if inflation remains near zero—markets see scope for a 25 bps cut to –0.25% as early as March next year—but the threshold for such a move is high.
What should sterling traders watch in UK GDP?
A modest 0.1% m/m rebound is expected as prior supply disruptions fade. The broader GBP path, however, remains tied to global risk sentiment and U.S. yields.
Why does the openings-to-unemployed ratio matter?
It gauges labor-market tightness. A ratio below 1.0 implies fewer job openings than unemployed workers, easing wage pressures and supporting a dovish rate path.
How could BoJ commentary impact JPY?
Any hint of faster policy normalization or less tolerance for yen weakness could strengthen JPY by narrowing rate differentials, pressuring USD/JPY lower.
This article was produced by BPayNews for informational purposes and does not constitute investment advice.
