NewsEbury FX Weekly Market Update: G3 central bank meetings headline hectic trading week

Last week’s currency rankings had an unusual couple on top: the Chinese yuan and the Swiss franc.

The former was buoyed by the increasing signs that China is moving away from its zero-covid lockdown policy, whereas the latter appears to have finally caught a break after a few weeks of improving risk sentiment, as traders brace for another outsized interest rate hike from the Swiss National Bank this week. Moves in currencies and financial markets in general were, however, rather subdued as traders marked time ahead of this week’s avalanche of central policy news.

The Federal Reserve, European Central Bank and Bank of England will all hold their last policy meetings of the year in a period of fewer than 24 hours on Wednesday and Thursday. All three are once again set to deliver sizable rate increases, although we expect to see a moderation in the size of these hikes, with 50 basis point moves priced in across the board.

In addition, the US and UK inflation numbers for November both come out just before their respective central bank meetings. The potential for a surprise either way in those reports that upset the narratives just before the meetings is an underappreciated risk, we think. Either way, get ready for some serious volatility in currency markets this week, particularly surrounding the aforementioned central bank announcements.

Read the Full Ebury report here.