Monetary policy will take centre stage this week as several major central banks conclude their latest policy meetings. While most institutions are widely expected to keep interest rates on hold, markets will be watching closely for any shift in tone from policymakers as they respond to the inflationary risks posed by the war in the Middle East.
Last week’s key rate movements
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GBP/EUR – Up 0.2% on the week
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GBP/USD – Down 1.2% on the week
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EUR/USD – Down 1.3% on the week
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AUD/USD – Down 0.7% on the week
Pound (GBP)
The Bank of England (BoE) is expected to leave interest rates unchanged when it concludes its latest policy meeting this week, placing the focus on the bank’s forward guidance. If policymakers signal a hawkish pivot may be needed to counter inflationary pressures stemming from the war in the Middle East, the pound (GBP) is likely to strengthen.
Euro (EUR)
The European Central Bank’s (ECB) latest policy statement will act as a key catalyst for the euro (EUR) this week, amid speculation that recent events will force the bank to restart its hiking cycle.
US dollar (USD)
Geopolitical uncertainty will likely continue to stoke demand for the US dollar (USD) this week, with further gains likely if the Federal Reserve strikes a hawkish tone when it delivers its latest policy decision on Wednesday.
Australian dollar (AUD)
Expect the Australian dollar (AUD) to build on its recent gains this week if the Reserve Bank of Australia (RBA) hikes rates and signals the crisis in the Middle East is likely to prompt more tightening in the future.
South African rand (ZAR)
The South African rand (ZAR) may face an uphill battle this week, with rising oil prices and further geopolitical uncertainty likely to weigh on demand for the emerging market currency.
Canadian dollar (CAD)
An expected cooling of domestic inflation last month may be shrugged off by the Canadian dollar (CAD) in the first half of this week, with the focus on the Bank of Canada (BoC) and its policy outlook, and how it will react to a prolonged disruption to global energy prices.
New Zealand dollar (NZD)
The New Zealand dollar (NZD) is likely to falter this week if New Zealand’s latest GDP figures show economic growth slowed sharply at the end of 2025.
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