Global Currencies Steady Ahead of Key Central Bank Decisions

The U.S. dollar held firm on Monday after two weeks of declines, as traders prepared for a busy stretch of central bank meetings led by the U.S. Federal Reserve. Markets have largely priced in an interest rate cut from the Fed this Wednesday, but expectations remain uncertain due to a divided committee, increasing the potential for market volatility.

Major central banks in Australia, Brazil, Canada, and Switzerland are also set to meet this week, though investors do not anticipate policy shifts outside the Fed’s move.

The euro traded at $1.1644, staying within its narrow multi-month range, while the yen stabilized at 155.28 per dollar after a weak November. Analysts are anticipating what they call a “hawkish cut” from the Fed, meaning officials may lower rates while signaling a cautious outlook on further easing. Such messaging could strengthen the dollar if it tempers expectations for multiple rate cuts in the coming year.

BNY’s head of markets macro strategy, Bob Savage, noted the possibility of dissents from both hawkish and dovish policymakers, adding to the uncertainty.

The Australian dollar hovered at $0.6640 after rallying in recent weeks, supported by strong economic data that has shifted expectations away from rate cuts. The Reserve Bank of Australia meets Tuesday, with markets now pricing in the next rate move as an increase—potentially as early as May. ANZ analysts expect the RBA to keep its cash rate steady at 3.60%.

In Canada, the loonie eased to C$1.3829 after reaching a 10-week high on strong labor figures. The Bank of Canada is expected to hold rates on Wednesday, with a hike not fully priced in until late 2026.

Elsewhere, the New Zealand dollar traded at $0.5779, while the Swiss franc weakened slightly to 0.8045 per U.S. dollar amid subdued inflation that supports Switzerland’s 0% policy rate.

Sterling hovered near $1.3324, and China’s offshore yuan traded at 7.068. In Brazil, policymakers are expected to maintain the benchmark 15% rate, with potential cuts signaled for next quarter.