U.S.
The main event will be the Federal Reserve meeting on September 19-20. The central bank is largely expected to keep interest rates unchanged at 5.50%, with a 97% expectation for no action, according to CME’s FedWatch Tool.
The U.S. dollar index was up 0.26% at 105.32, posting its ninth straight weekly gain. The US dollar, therefore, dollar index move will have a meaningful impact on the market. Any rate hike decision will extend recent gains, and it could test 106.70-107.25 very soon or vice versa.
U.K.
The UK inflation report is set to be released on Wednesday. CPI on a YoY basis is forecast to have a mild increment by 7.1% compared to previous 6.8%.
Further, the Bank of England will hold a policy meeting on Thursday with an exception of another 25 basis points hike. This will be a 15th consecutive rate increase and push the interest rate to 5.5% but expect that this would be the last in the hiking cycle and anticipate a dovish shift in BOE’s expectations.
The pound may face pressure again in such a scenario. The GBPUSD pair could test 102.2020-101.8085, if MPC will give any dovish statement.
Sterling posted a 0.59% fall against the US dollar last week, that was the fourth consecutive fall.
Eurozone
From the Eurozone, French and German PMI numbers will be the key economic data to watch. Both counties expect to post slightly higher numbers from previous. The numbers are expected at 46.3, 39.50 compared to previous 46.00, 39.1 respectively.
The EURUSD pair posted 0.36% weekly fall at 1.06596 last week. However, the pair was able to recover slightly from six-month low of 1.0629 following the European Central Bank’s (ECB) policy announcement, in which the central bank raised rates to a record-high 4% but signaled it was likely done with hikes.
This week, the Fed and BOE policy decision will give direction to the currency. Looking at the strength in the dollar, the pair may remain weak and could test next support 1.06375-1.05995 very soon.
Japan
The Bank of Japan Policy decision will have a meaningful impact on the Yen. Market expectation is to hold pat on rates unchanged at -0.10%.
But despite the BoJ’s tightening move, the yen has continued to weaken against the dollar. As rising US yields and soaring energy prices are putting pressure on the currency. Dollar/yen has recently tested its highest levels of the year, and a combination of a slightly hawkish Fed alongside a BoJ that maintains its loose stance next week may be the catalyst for a break. The USDJPY upside levels expect at 149.15-149.80 in days to come