Currencies Hold Tight Ranges as Oil Eases and Treasuries Steady Before Busy Central Bank Week

Currency markets opened the week on Monday, October 26, in a holding pattern. Major currencies moved within tight ranges as traders turned to a crowded calendar of central bank decisions and corporate earnings. A pullback in oil prices and in US Treasury yields leaned gently on the dollar, according to Reuters reporting from Hong Kong.

Oil was the first mover. Brent crude futures slipped more than 1% to around $115 a barrel, after touching a six-month high last week. The dip followed a Reuters report that Qatari mediators were in Tehran on Sunday, working in coordination with the United States to de-escalate regional tensions.

Treasuries, meanwhile, mostly kept the gains from a recent safe-haven rally. Elevated oil prices were keeping inflation worries alive, and a tech-led selloff tied to concerns about AI had pushed investors out of risk assets. The US 10-year yield was last down at 4.974%, and the 30-year stood at 5.299%, both near one-month lows.

Ray Attrill, head of FX strategy at National Australia Bank, said the bond market looked to be in the driver's seat for the dollar for now. He described the market as responding to the fall in Treasury yields and to the narrowing of yield gaps between the United States and other G10 majors, which he said had taken some of the heat out of the greenback.

The moves were small. The dollar index, which tracks the currency against a basket of peers, was a shade weaker at 101.64. The euro rose 0.16% to $1.122, helped by relief that France was spared a Moody's downgrade despite social unrest. Sterling gained 0.1% to $1.3385. The Australian dollar was down 0.04% at $0.7030, while the New Zealand dollar added 0.06% to $0.572. The yen was largely steady at 156.920 per dollar.

The week's main event is the decisions from five major central banks. The US Federal Reserve, the European Central Bank and the Bank of Japan are expected to hold rates steady. Markets are pricing in potential hikes from the Bank of Canada and the Reserve Bank of New Zealand.

Chris Weston, head of research at Pepperstone, wrote in a note that forward guidance could matter more than the decisions themselves. In his view the rate calls may be largely discounted already. What could move short-term rates is how policymakers shape expectations for later meetings, and whether markets must reprice the forward rate curve.

Elsewhere, spot gold was slightly lower at $3,986.16 an ounce. Bitcoin fell 0.6% to $79,925.84, and ether dropped 1.1% to $2,317.33.

With positioning this quiet, the signals to watch are the tone of the central bankers' statements, any further news from the Qatari mediation effort in Tehran, and whether Treasury yields hold near their one-month lows.