As the week begins, investors are keeping a close eye on the Bank of Japan’s upcoming meeting and the last few data releases before the Federal Reserve and European Central Bank’s rate decisions in early May.
The euro rose by 0.25% against the dollar at $1.1015, returning to above $1.10 for the first time since hitting a 14-month high of $1.10755 earlier this month.
German business morale increased slightly in April, according to a survey published on Monday, further boosting positive signs for Europe’s largest economy as it looks to dodge a winter recession.
Additionally, Belgian central bank chief and ECB policy maker Pierre Wunsch made hawkish remarks, adding to the euro’s gains.
The Japanese yen weakened against the euro, dropping by 0.63% to 148.3 yen, as the yen was weighed down by the Bank of Japan’s Governor Kazuo Ueda’s comments about the need to maintain monetary easing.
The euro is now on the verge of reaching October’s 148.385 yen, and a break past that would make it the highest since late 2014. Meanwhile, the dollar rose 0.36% against the yen to 134.60.
The currency markets were otherwise relatively calm as investors await the key central bank meetings that are coming up.
The Bank of Japan is set to hold its meeting on Friday, which will be chaired by Governor Ueda for the first time. It is expected that Ueda will maintain the BOJ’s current ultra-easy yield curve control policy.
Growth and inflation data from Germany and France are also due on Friday.
Simon Harvey, head of FX analysis at Monex Europe, believes that we are currently in a period of low FX volatility ahead of the ECB and FOMC meetings.
Harvey says that there are many factors that could drive further movements, but they are waiting for a catalyst.
Investors are looking for signs of economic strain and evidence of sticky inflation from the US first-quarter GDP and personal consumption expenditures data.
The Federal Open Market Committee meeting is expected to raise rates by another 25 basis points at next week’s meeting, while the ECB is also expected to raise rates by a quarter point, with the possibility of a 50 basis points hike. Eurozone inflation and growth data are also due this week.
On Wednesday, the Swedish central bank will also hold its meeting, but a priced-in 50 basis points hike from the Riksbank is unlikely to help the crown much beyond limiting its downside.
The Swedish currency touched 11.475 per euro in March, its weakest since 2009, and has failed to recover much since then.
Sterling remained flat at $1.2435, while the Swiss franc was slightly firmer at 0.8903 per dollar.
