Summer trading looks like it may have finally arrived in markets considering the below-average levels of liquidity and limited intraday volatility in FX markets despite the deluge of data this week. The first half of the week, headlines around Chinese regulations and equity markets weighed on risk sentiment. The most notable FX moves however occurred in the second half of the week and were centred around the US dollar after the Federal Open Market Committee noted there has been progress in the economic recovery but it wasn’t substantial enough to bring forward the discussion of QE tapering. Also in the US, Q2 preliminary GDP figures surprised to the downside relative to analysts’ expectations, further applying pressure on the greenback. On the fiscal front, bipartisan Senate negotiators reached a deal on an infrastructure package and the chamber voted to advance it, setting in motion a final vote on the bill in the coming days. Elsewhere, a slip in Canadian CPI figures weighed on the loonie’s rally as inflation data begins to moderate and embolden claims that the overshoot is in fact transitory. Next week, the focus will be on the Bank of England to announce its policy decision and comment on the recent inflation overshoots and recovery in the labour market.
Read Monex’s latest Week Ahead:
Simon Harvey, Senior FX Market Analyst
Olivia Alvarez Mendez, FX Market Analyst
Ima Sammani, FX Market Analyst