ECB Policy & US Growth Data Set the Tone This Week.

Written By Alex Iakovides

A sense of anticipation is building across foreign exchange markets as investors position for a pivotal European Central Bank (ECB) policy meeting and a key US growth report. After last week's mixed global business activity data highlighted the ongoing divergence between a resilient US economy and a more sluggish Europe, this week’s high-impact releases will be critical for setting the market's direction heading into November.

The Pound Sterling begins the week in a holding pattern, largely influenced by external drivers. With the UK domestic calendar relatively light, the currency's performance will be sensitive to any shifts in the EUR/GBP exchange rate following the ECB's announcement on Thursday. The broader direction of the US Dollar will also remain a key factor for Sterling's movements.

The US Dollar continues to be supported by the narrative of American economic resilience. This view will be tested on Thursday with the release of the advance Q3 Gross Domestic Product (GDP) report. A strong growth number would reinforce the Federal Reserve’s patient stance on interest rates and could provide further support for the currency, underscoring the policy divergence with other major central banks.

All eyes are on the Euro this week, with the European Central Bank set to deliver its latest policy decision on Thursday. While no change in interest rates is expected, investors will be scrutinising President Lagarde's press conference for any forward guidance on the future pace of easing. Preliminary inflation data from Germany, due on Friday, will also be closely watched.

Events to Watch This Week:

  • Tuesday, October 28: German Ifo Business Climate

  • Thursday, October 30: European Central Bank (ECB) Interest Rate Decision & Press Conference & US Advance GDP (for Q3)

  • Friday, October 31: Eurozone Preliminary CPI

The week is clearly defined by two major events: the ECB's policy outlook and the US growth report. The outcomes will be crucial in determining the medium-term trends for the major currency pairs and will be a key consideration for any business managing currency risk this quarter.

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Alex Iakovides https://risemedia.digital
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Economic Growth Take Centre Stage for FX Markets.