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Forex Today: Greenback strengthens ahead of US data; RBA Bullock speaks and USD/JPY trades above 150.00

The highlight of the Asian session will be RBA Bullock's appearance before the Senate Economics Legislation Committee. Later in the day, the European Central Bank will announce its monetary policy decision, and the US will release critical economic data, including Q3 GDP and Jobless Claims.

Here is what you need to know on Thursday, October 26:

The US Dollar Index (DXY) rose for the second consecutive day, rising above 106.50, the highest level since last Friday. The Greenback received a boost from higher Treasury yields and deteriorating market sentiment following the latest round of earnings results. The Dow Jones dropped 0.32%, and the Nasdaq lost 2.43%. The 10-year Treasury yield rose to 4.94%.

Israel agreed to delay the invasion of Gaza. Prime Minister Benjamin Netanyahu stated that they are preparing for a ground invasion. Following these comments, crude oil prices rebounded, and WTI rose above $85.00.

Data from the US showed a surprising increase in New Home Sales in September, reaching 759,000 (annual rate), surpassing the market consensus of 680,000.

Key data is due from the US on Thursday. The first Q3 Gross Domestic Product estimate is expected to show a 4.2% expansion. Additionally, reports such as the Core Personal Consumption Expenditure Price Index, Initial Jobless Claims, and Durable Goods Orders will be released. These numbers are likely to have an impact on the market, the US Dollar, and expectations regarding Federal Reserve (Fed) monetary policy. Moves in the bond market could also influence XAU/USD. If US data continues to indicate a robust economy, the US Dollar could benefit.

EUR/USD rose above 1.0600 but subsequently declined towards 1.0560. The pair continues to face downward pressure, although it remains above a short-term uptrend line. The European Central Bank (ECB) is expected to keep interest rates unchanged on Thursday. The focus will be on ECB President Christine Lagarde's forward guidance. With the Eurozone heading towards a recession and inflation indicators slowing down, it is unlikely that there will be any rate hikes in the near future.

ECB Preview: Forecasts from 11 major banks, good moment to pause

GBP/USD recorded its lowest daily close since October 3, just above 1.2100. The British Pound also weakened against the Euro on expectations that the Bank of England (BoE) will maintain unchanged interest rates.

USD/JPY broke above 150.00 and is surging, potentially attracting the attention of Japanese officials. This development may lead to increased volatility in Yen's crosses over the following hours. 

USD/CAD jumped to its highest level since March, moving towards 1.3800, following the Bank of Canada (BoC) meeting. The BoC kept its key rate unchanged at 5% but maintained a tightening bias. The Bank's inflation forecast indicates that it expects inflation to reach the 2% target by the end of 2025, slightly later than its previous projection of mid-2025.

Analysts at Wells Fargo on BoC and CAD: 

We believe the BoC's interest rate pause will be an interest rate peak. Given we forecast slower growth and inflation than the central bank, we expect policy rate to hold steady for an extended period, before rate cuts begin in Q2-2024. As Canadian growth remains subdued and in the absence of further BoC tightening, we also see potential for further Canadian dollar weakness over the next several months.

The Australian Dollar rose during the Asian session following higher-than-expected Australian inflation data but later retraced its gains. AUD/NZD reached a five-week high at 1.0915 before turning lower and falling to 1.0860. AUD/USD reached weekly highs at 0.6400 and then reversed sharply, falling toward 0.6300. On Thursday, Reserve Bank of Australia (RBA) Governor Michele Bullock will appear before the Senate Economics Legislation Committee. Later in the day, the Export and Import Price Index is scheduled to be released.

Analysts at TD Securities: 

Q3 CPI data handily beat the RBA's and analyst forecasts. Along with the Q2 trimmed mean measure being revised up and strong signs of domestic inflation, there is now a clear signal for monetary policy to respond. We now expect the RBA to hike 25bps at next month's meeting to 4.35% on the target cash rate. We believe failing to act could harm the RBA's credibility. The possibility of the RBA delivering a subsequent hike in 2024 cannot be ruled out.

The Central Bank of the Republic of Turkey (CBRT) is scheduled to meet on Thursday, and the consensus points to another 500 basis points rate hike, bringing the interest rate to 35%. USD/TRY has reached a new record high, closing above 28.00.

Gold regained momentum despite higher yields and tested levels above $1,980. Meanwhile, Silver failed to reclaim the $23.00 level.


 


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Author

Matías Salord

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

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