How FX can react to a heavy central bank week

The market is very focused on the Federal Reserve As meeting next week but the tariff decision will come from all parts with the Bank of England, the Bank of Canada, the Norges Bank and the Bank of Japan announced the ranking decision.

The market expects Fed, Norges Bank and BOC for each level of policy deducted by 25 bps, while Boe and BOJ tend to remain detained.

Boe is also expected to announce it will slow down the rate of quantitative tightening over the next 12 months to 50-60 billion pounds ($ 149.08 billion) from 100 billion pounds in the previous year.

How is the market reaction?

Danske Bank sees the reverse risk of short dollar tariffs and the risk of decline to the Euro if Fed cuts the tariff.

Nomura has opened a short GBP trade, on the grounds that there is a larger risk of a tail for sterling due to the announcement of Boe’s quantitative tightening next week.

Another piece by Norges Bank can trigger profit making, while the decline in EUR/NOK below 11.60 can be on the card if the central bank leaves the Norwegian policy level not change, said Unicredit.

For Yen, a higher level of policy in Japan and a lower level in the US supports weaker dollars/yen, said Unicredit. They saw the dollar/yen back below 145 in 2025 and under 140 at the end of next year, from around 147 now.

In Canada, USDCAD is likely to trade on C $ 1.38 if the BOC cuts interest rates, said Unicredit.
Source: Reuters