October 27, 2021
EUR/USD: The euro fell against the dollar as expectations that the European Central Bank will take a calm stance at its meeting on Thursday. A weaker euro due to the price shock in the commodity market is likely to force the ECB to revise its short-term inflation forecast, which may become known soon. Germany’s business climate index released on Monday, which showed business sentiment worsening for the fourth straight month in October, also put pressure on the euro. The weaker-than-expected business sentiment survey was followed by a gloomy forecast from Germany’s central bank, which said in its monthly report that economic growth is likely to slow sharply in the fourth quarter.
GBP/USD: The British pound initially rose against the dollar after British retailers reported stronger-than-expected sales in October, confirming the prospect of a rate hike, but recent mixed data with strong business activity indexes and weak retail sales have made investors cautious. The monthly CBI retail and wholesale survey showed that the overall retailer sales balance rose to +30 in October from +11 in September, the lowest level since March when many retailers were closed during the COVID-19 lockout, which is certainly a positive factor for a stronger pound.
XAU/USD: Gold fell from a key psychological level of $1.800, mainly due to a rebound in the U.S. dollar as global bond yields refused to fall ahead of key central bank meetings. The European Central Bank will meet Thursday with expectations that it will remain to lower interest rates, and the Bank of Japan is unlikely to change policy when it meets Wednesday and Thursday, despite reports that it discussed phasing out the COVID-19 lending program. Elsewhere, Fed Chairman Jerome Powell announced last week that the Federal Reserve was ready to begin cutting bond purchases, but said it was premature to raise rates yet as employment remained low. The increase in gold as an “inflation hedge” has so far proved short-lived, as markets have aggressively played against central banks in the expectation that rising inflation will lead to higher interest rates.