**Weekly Forex Market Outlook: Central Bank Rate Cuts, US-NATO Summit, and Key Economic Data**
*Based on the original article by Vignesh Selvaraj, ForexFactory.com, and further supplemented with market insights from Reuters, Bloomberg, and dailyfx.com.*
—
### Introduction
The upcoming week in the global forex market is poised for significant moves, fueled by events ranging from central bank policy decisions to crucial economic data releases and high-level political developments. The direction of interest rates in major economies continues to drive trading sentiment, while geopolitical factors and inflation reports add fresh volatility. This outlook explores the primary drivers shaping the market narrative, the implications for currencies and commodities, and the risks on the horizon.
—
### Central Bank Update: Anticipation of Further Rate Cuts
Central banks remain in focus as the global policy cycle begins to pivot. Last week’s rate cut from the European Central Bank (ECB) amplified expectations that more monetary authorities will soon follow.
**Key takeaways:**
– **ECB Sets the Stage:**
– The ECB reduced its benchmark rate by 25 basis points, the first cut in five years.
– Despite the cut, President Christine Lagarde cautioned against projecting a rapid easing cycle, citing persistent inflation, particularly in wages and services.
– The move puts the euro under pressure, especially against higher-yielding peers and the US dollar.
– **BOC and SNB Lead Easing:**
– The Bank of Canada surprised the markets with a 25 basis point cut, becoming the first G7 central bank to do so this cycle.
– The Swiss National Bank cut rates for the second time this year.
– The shift in tone from these institutions suggests a broader easing cycle could unfold, especially as inflation in advanced economies shows signs of moderating.
– **US Federal Reserve Holds the Line:**
– In contrast, the Federal Reserve kept interest rates unchanged at its recent policy meeting.
– Policymakers signaled that they will await clearer evidence of inflation returning to the target before easing.
– Market pricing indicates expectations for at least one rate cut before year-end, but timing remains uncertain.
**Implications for major currencies:**
– The divergence between the Fed and other central banks supports the US dollar, at least in the short term.
– The Canadian dollar and Swiss franc may face headwinds as their interest rate differentials widen versus the greenback.
—
### Key Economic Data: US CPI, UK Jobs, China and Eurozone Inflation
The week ahead brings multiple high-impact data releases that may reshape market expectations for central bank policy.
**United States:**
– **Consumer Price Index (CPI) – Scheduled for release:** This report is critical for Fed deliberations. The previous print showed headline inflation sticky but with some moderation in core components.
– **Producer Price Index (PPI):** Trends in wholesale prices may foreshadow future consumer inflation, adding nuance to the Fed outlook.
– **
Read more on AUD/USD trading.