- Currency futures recalibrate as the week begins, anticipating a Fed rate cut on Wednesday.
- Weaker dollar keeps Euro, Pound, Yen, and Aussie futures firm.
- Risk sentiment and central bank decisions remain the key drivers for currency futures this week.
Currency futures are recalibrating this week as traders react to the weaker US dollar and central bank rate decisions. The Dollar Index (DXY) slid below 99.00 as the Fed is widely expected to reduce rates by 25 bps.
Euro FX futures (6E) remain steady, gaining momentum from stronger-than-expected German industrial production data and an overall improved sentiment surrounding the EU economy. Germany’s October industrial production climbed to 1.8% from the previous 1.3%, while the forecast was a 0.4% contraction. This enforces the view that the bloc’s slowdown could have already bottomed out. This, combined with ECB officials’ hawkish commentary, has strengthened the Euro.
Meanwhile, British pound futures (6B) remain steady near a five-week high as investors respond positively to the UK’s fiscal measures. This also reflected that the Bank of England will cut rates more cautiously. With the broad risk-on sentiment across global markets and contained UK inflation, the bias remains modestly bullish.
The Japanese yen futures (6J) are a focal point of attention for traders, as recent commentary from Japanese officials has reflected a view that the Bank of Japan could hike rates in December. Rising wage growth has prompted the central bank to move away from the ultra-loose policy, finally. The narrowing gap between US and Japanese yields, combined with a softer dollar, keeps the yen futures in a bullish trajectory.
From the Pacific, Australian dollar futures (6A) gained on Monday, benefiting from improved global risk sentiment, a softer US dollar, and upbeat Chinese trade data. Commodities have been stabilizing, while volatility is easing, and AUD futures have seen a cautious bullish positioning. The RBA is expected to stay unchanged this week, but the recent data pushes for a rate hike in 2026, keeping the Aussie’s medium-term bullish trend intact.
Across the entire currency futures market, the key driver remains the dovish Fed expectations, with markets pricing 90% odds of a rate cut this Wednesday. Any deviation seen in the Fed Chair’s press conference could trigger sharp volatility in the market. On the other hand, various US labor market data are due this week that could guide the US economic health and Fed policy moving into 2026.
