Currency markets stay rangebound ahead of central bank decisions

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Highlights

Major currencies remain rangebound as investors await policy signals from five central banks, with Fed, ECB, and BOJ expected to hold rates steady.
Brent crude drops over 1% to around $115 a barrel amid Qatari mediation efforts in Tehran, easing geopolitical tensions and impacting inflation sentiment.
Euro rises 0.16% to $1.122 as France avoids a Moody's downgrade, while U.S. 10-year Treasury yields fall to 4.974% and the dollar index dips to 101.64.

Markets position for policy signals

As reported by Reuters, major currencies trade in tight ranges on Monday as investors brace for decisions from five major central banks later in the week. The U.S. Federal Reserve, the European Central Bank and the Bank of Japan are expected to leave rates unchanged, while markets are pricing in possible increases from the Bank of Canada and the Reserve Bank of New Zealand.

Analysts say the policy statements may matter more than the rate decisions themselves, as investors assess how officials shape expectations for coming meetings. Chris Weston, head of research at Pepperstone, says the market has largely discounted the decisions, leaving forward guidance as the main potential driver for short-term rates and broader repricing.

Ray Attrill, head of FX strategy at National Australia Bank, says the U.S. bond market appears to be driving broader dollar performance for now. He says falling Treasury yields and narrowing yield differentials between the U.S. and other G10 currencies have taken some momentum out of the dollar.

Dollar eases as oil and yields retreat

Oil prices ease, with Brent crude futures falling more than 1% to around $115 a barrel after reaching a six-month high last week. The move follows a Reuters report that Qatari mediators were in Tehran on Sunday as part of efforts to de-escalate regional tensions in coordination with the U.S.

U.S. Treasuries largely hold recent gains from a safe-haven rally, even as elevated oil prices keep inflation concerns in focus and a technology-led selloff tied to AI worries prompts a shift away from risk assets. Yields on U.S. 10-year notes are down at 4.974%, while 30-year yields stand at 5.299%, near one-month lows.

In currency trading, the euro rises 0.16% to $1.122, helped by relief that France avoids a Moody's downgrade despite social unrest, while sterling gains 0.1% to $1.3385. The dollar index is slightly weaker at 101.64, the Australian dollar slips 0.04% to $0.7030, the kiwi adds 0.06% to $0.572, and the Japanese yen remains broadly steady at 156.920 per dollar.

Elsewhere, spot gold is slightly lower at $3,986.16 per ounce. In cryptocurrencies, bitcoin falls 0.6% to $79,925.84 and ether declines 1.1% to $2,317.33.

In our earlier article, we covered the internal debate at the Federal Reserve over how openly officials should communicate policy intentions ahead of the next rate decision. We noted that frequent remarks from policymakers helped dial back expectations for additional tightening even after hotter inflation data, underscoring how guidance can move Treasury yields and broader market pricing.

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