Some weeks are quiet. This is not one of them. Five central banks decide on interest rates between Wednesday and Friday, and US inflation data lands in the middle of it. If you trade forex or CFDs, this week can move the dollar, the euro, the yen, the Canadian dollar and the New Zealand dollar, so it is worth knowing who decides when, what is expected, and how to stay safe. This post explains it in plain language.
First: what does a central bank do?
A central bank is the institution that sets a country’s main interest rate. The US has the Fed, Europe has the ECB, Japan has the Bank of Japan, Canada has the Bank of Canada and New Zealand has the RBNZ.
Remember the idea from our yields guide: money follows interest. If a country’s interest rate goes up, investors want to hold that country’s money to earn more, so its currency tends to get stronger. If the rate is cut or looks likely to fall, the currency tends to get weaker. That is why traders watch these meetings so closely.
The week at a glance (all times GMT, the same as Accra)
| When | Who | Rate now | What is expected | Pair it moves most |
|---|---|---|---|---|
| Wed Oct 28, 01:00 | Reserve Bank of New Zealand | 2.75% | A 25 basis point hike to 3.00% | NZDUSD |
| Wed Oct 28, 13:45 | Bank of Canada | 2.25% | About an 81% chance of a 25 basis point hike to 2.50% | USDCAD |
| Wed Oct 28, 18:00 | US Federal Reserve (press conference about 30 minutes later) | 3.75–4.00% | Hold. A hike is priced at only about 10% | All dollar pairs, the dollar index and gold |
| Thu Oct 29, 12:30 | US growth (GDP) and PCE inflation | n/a | PCE is the Fed’s favourite inflation number | All dollar pairs |
| Thu Oct 29, 13:15 | European Central Bank (press conference 13:45) | Deposit rate 2.50% | Hold | EURUSD |
| Fri Oct 30, about 03:00 | Bank of Japan | 1.25% | Hold | USDJPY |
A basis point is one hundredth of a percent, so 25 basis points is a quarter of one percent. The expectations come from market reports on October 25 (Dow Jones Newswires, citing analysts from HSBC, TD, ING and others). They can change before the decisions, so check the latest numbers on the day.
The most important idea: it is the surprise that moves price
Here is something that confuses beginners. A bank raises rates, and its currency falls. How?
Because markets move before the news. If everyone expects a hike, traders have already bought that currency in the days before, so the hike is “already in the price.” When it arrives as expected, there may be little move, and sometimes people sell. The big moves come from surprises:
- The bank does something different from what was expected (for example, no hike when a hike was priced).
- The bank says something new about the next meeting. Most banks this week are expected to hold, so what they say about a possible December hike may matter more than the decision itself.
Bank by bank, in plain language
1. New Zealand (RBNZ), Wednesday 01:00. The first decision of the week, and the earliest. Economists expect a hike to 3.00%. If it arrives as expected, NZDUSD may not move much. A hold would be a big surprise and could pull NZD down fast. Pair: NZDUSD.
2. Canada (Bank of Canada), Wednesday 13:45. Markets priced about an 81% chance of a hike to 2.50%, but some analysts at TD were doubtful, so this one is not certain. The bank also publishes a new report with its outlook. A hold would surprise the market. Pair: USDCAD.
3. The US Fed, Wednesday 18:00. This is the big one, because the dollar is on one side of almost every pair. The Fed is expected to hold at 3.75–4.00%, and a hike is priced at only about 10%. There are no new Fed projections this time, so the message comes from the statement and from Chair Warsh’s press conference. The market is already pricing a hike in December, so the question is whether the Fed sounds firm about it or relaxed. A firm tone would likely support the dollar, yields and our DXY Bias Score. A relaxed tone would likely do the opposite. Remember also from our yields guide that the 2-year yield is the best live read on what the market thinks the Fed will do. Pairs: all dollar pairs, the dollar index and gold.
4. US growth and inflation, Thursday 12:30. The day after the Fed, the US reports its GDP (how fast the economy grew) and PCE (the Fed’s favourite inflation number). A hot PCE would add to hike bets. A cool one would take the pressure off.
5. Europe (ECB), Thursday 13:15. Widely expected to hold after its September hike, according to the market reports. Some analysts see December as the more likely time for another move. Notice the timing: the ECB decision comes only 45 minutes after the US data. That makes Thursday a double hit for EURUSD, with two big news events almost back to back. Pair: EURUSD.
6. Japan (Bank of Japan), Friday about 03:00. Expected to hold at 1.25%. Analysts quoted in the reports see the next hike as more likely in December, with a chance that one board member votes for a hike now. Pair: USDJPY.
What about GBPUSD, gold and the DXY Bias Score?
- GBPUSD has no Bank of England news this week. That meeting is on November 5. In our weekly charts post we showed GBPUSD going its own way against the dollar index and EURUSD. With the other currencies reacting to their own banks, that gap could last or flip, so check that DXY, EURUSD and GBPUSD agree before looking for a trade.
- Gold usually reacts to what the Fed says and to yields, but last week it fell below $4,000 even while yields fell. Do not assume it will follow the usual rules this week.
- The DXY Bias Score is +6 (Bullish DXY). After the Fed decision we will update the tracker and tell you what changed.
A safe game plan for beginners
- Know the times. Put the decisions in your phone as alarms, in GMT.
- Do not trade the first minutes. When the news hits, price jumps both ways and the gap between buy and sell price (the spread) gets wider. Many beginners lose here.
- Wait for a calmer candle. Let a 15-minute or 1-hour candle close after the news before you decide anything.
- Do not hold a trade through a decision you cannot afford to lose. A trade open when a bank surprises the market can go far past your plan. If you are in a trade, think about closing or reducing it before the news.
- Check that the dollar index, EURUSD and GBPUSD agree. If one does not, stay out of that pair. This is our rule.
- Keep your size small, use a stop loss, and have a plan before the news. Our notional value guide shows how to work out what a move means for your account.
- It is fine to skip the week. No trade is a position too.
The risks
- Central bank decisions can cause big, fast moves and wide spreads. Prices can skip your stop loss during a spike (this is called slippage).
- Some of the numbers above come from reports a few days old and sources disagree on some details. Check the latest on the day.
- Trading forex and CFDs carries a high risk of loss. This is education, not a trade recommendation or financial advice.
Where the numbers come from
Decision dates and times come from a Forex Trading Community week-ahead and an Admirals guide, converted to GMT. Expectations and odds (Bank of Canada about 81% for a hike, RBNZ hike, Fed hike about 10%, ECB and Bank of Japan holds) come from the Dow Jones Newswires week-ahead, dated October 25, and a Sensei week-ahead. The Fed range and DXY Bias Score are from our Macro Tracker. We will go through the Fed decision in our next post.