Dollar Decline Pauses as Markets Await Multiple Central Bank Rate Decisions
nashnova research
The dollar steadied on Thursday after weeks of selling, with the Fed, the BOJ, and the ECB all meeting next week. Markets expect all three to hold rates, yet individual currencies are already pricing in divergent hike paths.
Why did the dollar stop falling?
Sterling, the Aussie, the kiwi, and the loonie all hit multi-week highs recently — some dollar longs have already been unwound.
But selling paused here: traders are reluctant to add short-dollar bets ahead of next week's triple central-bank lineup.
This means → the market is in a "wait-for-the-verdict" window, with position management trumping directional conviction.
What keeps the bull case for the dollar alive?
The core narrative: the AI boom is sustaining U.S. economic expansion, giving the Fed cover to keep rates "higher for longer."
The Fed is expected to hold the funds rate at 3.75%–4% in October; a December hike is the consensus base case.
In plain terms = as long as the U.S. economy doesn't slow, the dollar's yield advantage stays intact — other currencies can narrow the gap but not close it.
Sterling, Aussie, kiwi, loonie — who's rallying and why?
Sterling touched a one-month high of $1.3409 after hotter-than-expected UK inflation data; it held near $1.33955 on Thursday.
AUD stayed above $0.7025; RBA Deputy Governor Andrew Hauser said the inflation outlook had "materially worsened" due to high oil prices, prompting markets to price in a rate hike as early as next month.
NZD rose to a one-month high of $0.5709; CAD firmed near a one-month high of 1.4032 — both central banks are expected to hike next week.
Why are the euro and the yen stuck?
The yen hovered around 158 per dollar, caught between official intervention threats capping short-yen trades and a market view that the next BOJ hike — to 1.5% — won't land until early next year.
The euro has weakened for roughly a month and become the main vehicle for dollar-long trades — France's 10-year yield hit its highest since 2022, and social unrest underscored the political difficulty of cutting the deficit.
This reflects a persistent "fiscal risk + energy fragility" overhang attracting euro shorts, though $1.12 is acting as near-term support.
The euro can't go down and it can't go up — the pressure from bad news and positioning are almost perfectly offsetting, creating a stalemate.
Brent Donnelly
President, Spectra Markets
(commenting on current EUR dynamics)
What is the market watching from next week's three meetings?
The ECB is expected to hold its benchmark rate at 2.5%, but a hike later this year is already priced in.
The BOJ is expected to stand pat; the next hike to 1.5% is penciled in for early next year.
The Fed is expected to hold in October; a December hike is the base case.
In plain terms = all three are likely to do nothing next week. The real divergence is in who moves first afterward and by how much — that is what will set the next leg in FX.
市场有风险，内容仅供研究参考，不构成投资建议。