The forex market promises to be turbulent in the near term.
On Monday, with investors shying away from taking any big position ahead of the central bank monetary policy meetings this week, currencies in the forex market stuck to familiar territory.
Japan’s central bank, the Bank of Japan, is scheduled to end its two-day meeting on Tuesday; the U.S. Federal Reserve is set to complete its meeting on Wednesday, while the Bank of England is expected to raise interest rates on Thursday.
This week promises to be very busy for the forex markets, for the near-term.
Last week, with the European Central Bank reaffirmation its position that interest rates would remain low through the summer of 2019, the euro stuck to its position of around $1.1649 against the greenback, in early European trading.
Inflation data on the eurozone is set to emerge either later today or on Tuesday. This could help get the euro out of its narrow tract, opined analysts although investors appetite appears to be reluctant to make any large bets, for now.
“It will be an active week, there is a lot of event risk,” opined Manuel Oliveri, an analyst at Credit Agricole. “Markets are pretty much range-bound and it doesn’t look like there is much motivation to enter big positions.”
Positioning data shows that net long positions in the dollar remained remained at their largest for several months and that recent strengthening of the dollar could see a reversal in the coming days. Despite strong second quarter results the greenback did not see a gain as markets may have already factored in those results.
Analysts and investors are keenly watching the July data, since that is when U.S. tariffs against Chinese goods were activated.
There is also speculations regarding what the Bank of Japan may do, including adjusting buying schemes for exchange-traded fund (ETF) as well as those related to its yield-curve controls.
The USD has eased from a 6-month high above 113.00 yen scaled on July 19 following such speculations.
“While various speculations are being made over the BOJ, we believe they will stand pat on monetary policy. The focal point for us is whether the BOJ hints at future policy change,” said Shin Kadota, senior strategist at Barclays in Tokyo. “Opinion about potential actions on Tuesday varies greatly, and the meeting could trigger a market reaction, no matter what the outcome is.”
Meanwhile, the Chinese yuan continued to tread lower mostly from relentless pressure as to what the trade war with the United States will mean for the Chinese economy.