Who said summer markets were meant to be quiet? It certainly hasn’t been the case over the course of July and early August, although next week’s data calendar has all of the characteristics of lower market volatility. That’s of course if the US bond market starts to behave itself again…
Looking ahead to next week, the data calendar points to a quieter week, with the biggest event risk posed by US CPI. However, FX traders will also be wise to keep a close eye on how US bond auctions evolve given this week’s events. The Treasury is expected to sell $42bn in 3-year notes on Tuesday at 18:00 BST, $38bn in 10-year notes at the same time on Wednesday, and $23bn in 30-year bonds on Thursday. Aside from US CPI and the debt auctions, however, there will not be much to move markets. Banxico has an interest rate decision on Thursday, but markets expect a quiet meeting with no change from 11.25%. Also in the LatAm space, the BCB is set to release the minutes from its previous Copom meeting which will hopefully shed light on the reasoning behind their choice to cut rates by 50bps. While this will be highly interesting to economists, we do not expect markets to react much to these minutes. The other two reports to watch are China CPI on Tuesday and UK GDP on Friday, but again, these data releases will pale in comparison to US CPI in terms of market importance. It is therefore unsurprising that one-week options-implied volatilities for most G10 currencies have ground lower, but show a kink around Thursday’s US release.
You can read the Week Ahead in full here:
Simon Harvey, Head of FX Analysis
Jay Zhao-Murray, FX Market Analyst
María Marcos, FX Market Analyst
Nick Rees, FX Market Analyst