Week Ahead: Conservative Fed to be measured against April CPI

Central bank policy decisions have largely called the tune for FX markets to dance to this week. Between the Reserve Bank of Australia, the Federal Reserve, and the Bank of England, bond markets have been kept busy as communications from policymakers inferred different policy paths than implied by markets prior. The bond market volatility drove price action in the FX space, with the biggest adjustments occurring on Wednesday and Thursday in the wake of the Federal Reserve’s decision. Next week, volatility in global markets should settle somewhat as the economic calendar thins. Central bank communications will still sit at the forefront for FX traders, however, with a long list of Fed and ECB speakers set to hit the wires, while inflation data will test the conviction of money market traders in their still hawkish outlooks for global rates.

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Authors: 

Simon Harvey, Head of FX Analysis

Jay Zhao-Murray, FX Market Analyst

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