Dollar nearing an interim bottom?

What you need to take care of on Wednesday, October 26:

The American dollar gave up in the US session, finishing the day with losses against all of its major rivals. The EUR/USD pair trades near parity early Wednesday and ahead of first-tier events scheduled for next Thursday, when the United States is expected to report that the economy grew in the three months to September. The Q3 Gross Domestic Product growth is foreseen at 2.4%, reversing the negative trend from the previous two quarters.

At the same time,  the European Central Bank will announce its latest monetary policy decision. The central bank is expected to hike rates by 75 bps, upgrading the pace of tightening amid signs of a fast deterioration in economic conditions. The focus will be more on what policymakers are planning ahead rather than on the actual hike. Market players would be quite surprised if President Christine Lagarde comes out with a hawkish message.

US data and central banks’ announcements will define whether the dollar reached an interim bottom.

On Wednesday, the focus will be on the Bank of Canada’s monetary policy decision.

The GBP/USD pair settled at 1.1465, helped by the broad dollar’s weakness and despite of continued political noise in the United Kingdom. The UK’s new Prime Minister, Rishi Sunak, was once again on the wires, anticipating “difficult decisions” ahead. Meanwhile, Justice Secretary  Brandon Lewis and Business Secretary Jacob Ress-Mogg have resigned. Jeremy Hunt has been reappointed as Chancellor.

Commodity-linked currencies benefited from higher US equities. AUD/USD flirts with 0.6500 while the USD/CAD is about to pierce the 1.3600 level.

A dollar’s sell-off unexpectedly aided the Bank of Japan. USD/JPY trades below 148.00 as investors moved away from the safe-haven greenback.

Gold edged marginally higher and trades at around $1,653, while crude oil prices finished the day little changed. WTI currently trades around $84.90 a barrel.