The forex markets are typically quieter during the summer months, as traders take vacations and liquidity dries up. This year is no exception, with the USD holding stronger and risk currencies feeling the impact of reduced appetite for risk. US10Y yield is still above 4%, which is supporting the USD.
However, equity markets are looking fragile, and this could weigh on risk currencies in the coming weeks. There is very little news on the calendar this week, until Wednesday, when Chinese CPI data is released at 2:30am GMT. This is followed by US CPI data on Thursday, which is the most important event of the week.
The markets are forecasting a strong print. Friday sees the release of GBP GDP data, which is expected to show a tick up. PPI data is also released out of the US on Friday.
Overall, it is a quiet week for news, but the US CPI data on Thursday is the key event to watch. A miss on this data could see the risk tone accelerate making traders run for safe havens (USD).
However, a positive print could actually see a sell-off in USD.
What does this mean for traders?
Traders should be aware of the reduced liquidity in the forex markets during the summer months. This could lead to wider spreads and more volatility. Traders should also be prepared for the possibility of a sell-off in risk currencies if the US CPI data comes in strong on Thursday.
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This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. INFINOX is not authorised to provide investment advice. No opinion given in the material constitutes a recommendation by INFINOX or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
All trading carries risk.
