Precise Investors Editorial Team
The euro came under slight pressure and last traded 0.04% lower at $1.1729
The U.S. dollar slid on Monday ahead of a pivotal week filled with central bank decisions, while the euro hardly reacted to Fitch’s downgrade of France’s credit rating.
Trading in Asia was thinned with markets in Japan shut for a holiday, leaving currencies mostly rangebound over the course of the session.
The euro came under slight pressure and last traded 0.04% lower at $1.1729, though investors largely shrugged off Friday’s announcement from Fitch downgrading France’s sovereign credit score to the country’s lowest level on record.
The move strips the euro zone’s second-largest economy of its AA- status as it grapples with political crisis and ballooning debt.
Still, much of investors’ attention this week will be on the slew of rate decisions in Japan, UK, Canada, U.S., and Norway that could set the tone for markets.
Expectations of a rate cut from the U.S. central bank on Wednesday have weighed on the dollar in recent times, and it dropped 0.08% against a range of currencies to 97.58 on Monday.
Sterling gained 0.11% to $1.3565, while the Aussie dollar rose 0.23% to $0.6663, nearing a 10-month high hit on Friday.
We are calling for a 25-basis-point cut from the FOMC this week, which is more than fully priced, said Carol Kong, a currency strategist at Commonwealth Bank of Australia.
Just as important will be U.S. central bank members’ “dot plot” projections for rates and guidance from the bank Chair Jerome Powell on the extent and pace of any further easing.
In order to have an impact on currencies, Powell will have to out-dove the market by giving quite explicit hints about follow-up rate cuts. And if the FOMC does deliver an outsized 50-basis-point cut, that could also push the dollar down quite significantly, unless he suggests that there is a limited chance of follow-up cuts, said Kong.
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