Markets are responding to expected interest rate cuts by major central banks this week, significantly impacting currency values. The Bank of Canada (BoC) is projected to reduce rates by 50 basis points (bps) on Wednesday, pushing the USD/CAD pair to a four-year high near 1.4200. The US Dollar (USD) has strengthened ahead of the upcoming Consumer Price Index (CPI) data, which may influence the Federal Reserve's (Fed) interest rate decisions.
Analysts predict that US annual core CPI will rise to 3.3% in November, potentially affecting the Fed's anticipated 25-bps cut on December 18. The US Dollar Index (DXY) reached a two-day high at 106.35, reflecting this market sentiment.
In Europe, the Euro (EUR) is under pressure as the European Central Bank (ECB) is expected to cut its Deposit Facility Rate by 25 bps to 3% on Thursday. This would mark the third consecutive rate cut by the ECB, with market participants factoring in economic instability in the Eurozone.
Meanwhile, the British Pound (GBP) is gaining strength against the Japanese Yen (JPY), trading around 193.10. The BoE is expected to keep interest rates unchanged at 4.75% during its meeting on December 19, amid rising UK inflation.
As central banks navigate these economic pressures, traders remain vigilant, anticipating further developments that could shape currency movements in the coming days.