Currency calm continues ahead of key central bank meetings

Despite a small rebound in the wake of another solid non-farm payrolls release, the US dollar is broadly unchanged on the week as the recent consolidation phase in currency markets continues. Neither another tariff threat from president-elect Trump (this time targeting the BRICS economies) nor the (widely expected) collapse of the French government has made much sustained impact, suggesting market participants are waiting for more concrete news on the political front before repricing major currencies further. Next week’s US CPI data is unlikely to sway the FOMC from another 25bp cut the following week. And money markets are already discounting a dovish ECB (even if a 50bp cut now looks improbable). As such, we continue to think that currency markets will remain in consolidation mode into year-end.