|

Global FX: Divergent central bank paths and Oil – Wells Fargo

Wells Fargo Economics has raised its global Gross Domestic Product (GDP) forecast to 2.7% for 2026 and trimmed global Consumer Price Index (CPI) to 4.3%, reflecting a slightly lower Oil price path. They expect final hikes from the European Central Bank (ECB), Reserve Bank of Australia (RBA) and Bank of Japan (BoJ), a possible short cycle from the Bank of England (BoE), while the Bank of Canada (BoC) likely holds and emerging market central banks pursue mixed easing and tightening.

Mixed policy moves across major banks

"We have raised our global GDP growth forecast to 2.7% this year, and have trimmed our global CPI inflation forecast by two-tenths to 4.3% to reflect a modestly lower average oil price path."

"We expect final hikes from the European Central Bank, the Reserve Bank of Australia and the Bank of Japan, and potentially the start of a short hiking cycle from the Bank of England, where the Ofgem price cap has delayed some of the pass-through of the recent spike in energy prices."

"Others, like the Bank of Canada, however, are more likely to hold rates steady as they determine whether commodity-driven price increases begin to feed more meaningfully into underlying inflation."

"Among emerging market economies, policy is more divergent. We expect further easing from the People’s Bank of China as domestic demand remains soft, Brazil’s central bank to continue cutting as inflation moderates, tightening from the Reserve Bank of India and Banxico to remain on hold."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Author

FXStreet Insights Team

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

More from FXStreet Insights Team
Share:

Editor's Picks

AUD/USD rises to 0.6950 as USD slips on Fed's Warsh

AUD/USD regains traction and extends the bounce toward 0.6950 in the Asian session on Friday. Fed Chair Warsh's comments reinforce the selling pressure on the US Dollar, allowing the pair to stretch higher. Warsh said that he remains committed to delivering price stability without giving away anything on future interest rate path.

USD/JPY falls in symc with USD, gives up 158.00 after Warsh's speech

USD/JPY has come under fresh selling pressure and gives up 158.00 in the Asian session on Friday amid the emergence of fresh US Dollar selling. Fed Chair Warsh's non-committal commentary on the future tightening path, weighs on the US Dollar and the pair.

Gold looks vacillating above $4,150

Gold alternates gains with losses below the key $4,200 mark per troy ounce on Friday. The yellow metal’s irresolute price action comes in response to a modest pullback in the US Dollar and a tepid recovery in US Treasury yields across the board.

Week ahead: Stocks seek direction as earnings take centre stage
It has been a challenging week for investors as the hotter US CPI report and the solid start to the earnings season did not produce the expected market movements. With the exception of the aussie, the US dollar is currently posting minimal gains across the FX spectrum, with its post-CPI rally proving short-lived, especially as dovish Fedspeak persists.
CFTC report: Euro and Aussie shorts build as Gold exposure remains elevated
The week in one sentence: Euro shorts deepened, and Yen longs retreated in the week to October 13. In addition, Coffee buying continued, and Gold exposure remained elevated despite another price decline. Speculators turned more bearish on the Euro (EUR), taking net shorts to around 137.6K contracts, the highest level since January 2016.
Everyone's dumping Gold after hot US inflation. Here's why $4,100 could be a floor, not a cliff
Gold (XAU/USD) is recovering from a sharp sell-off triggered by hotter-than-expected United States (US) inflation data released on Wednesday. The precious metal briefly plunged toward $4,073 as investors increased their bets on further Federal Reserve (Fed) interest rate hikes before recovering as US Treasury yields and the US Dollar (USD) reversed their initial gains.