The dollar advanced on Monday, regaining some ground it lost earlier in the month, at the start of a week packed with data releases and central bank rate-setting meetings, including by the Bank of England and most importantly the Federal Reserve.
The euro slid 0.36% to $0.9932, the sterling lost 0.67% to $1.1537, and the dollar rose 0.82% against the Japanese yen to 148.6, as the weakness seen in the greenback earlier in the month continued to fade.
Currency markets are in wait-and-see mode ahead of the (Fed’s rate setting). The Australian and Canadian central banks both raised rates by less than expected at their October meetings, and markets read a dovish tone in last week’s European Central Bank 75 basis point hike.
The Fed is expected to deliver another 75-basis-point (bp) rate hike when the meeting concludes on Wednesday, which would be its fourth such increase in succession, but market pricing indicates roughly a 50% chance of just 50 basis points at its December meeting.
The euro barely reacted after data released on Monday that showed eurozone inflation came in hotter than expected at 10.7%, a fresh record high.
Also released on Monday was data that showed Japan spent a record 6.3499 trillion yen ($42.8 billion) on currency intervention this month to prop up the yen.
The dollar was last 0.74% higher against the yuan traded offshore at 7.32. Also on the week’s agenda is the Bank of England which will meet on Thursday, after a volatile period in British political and fiscal policies. A 75-bp rake hike is almost fully priced in.
The Reserve Bank of Australia (RBA) is tending towards the dovish end of the spectrum and is expected to raise interest rates by a more modest 25 bp even as inflation raced to a 32-year high last quarter.
The U.S. dollar climbed 2% on Brazil’s Real after former president Luiz Inacio Lula da Silva narrowly defeated President Jair Bolsonaro in a run-off election.