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A frosty week in the market finally heats up

A lack of liquidity in August is creating a lack of volatility in the FX market once again..



During the pandemic, no news was bad news as far as GBP was concerned. The Pound played the 'sitting duck' role and was punished time and time again when the UK was not involved in releasing economic data. Post-covid has seen the reverse happen with no news often being good news for currencies.

The issue with the FX market in August is the sheer lack of volume being traded with many people and businesses involved in currencies on holiday or simply taking a break. Usually during this time we see a rather stagnant market with both the Euro & Dollar gaining in value due to them being the most traded.

This week has seen £-€ flirt with a 3-week low and the £-$ a 4-week low. This is not necessarily a trend that we will see throughout the month, but it is something that was predicted after the last UK/£ risk event (interest rate decision).

Today sees the market hot up with important US inflation data that will have a direct effect on GBP. As will of course tomorrow's mini-risk event which sees June's UK GDP number. We will shortly see whether August will be a sideways month for Sterling or one that creates pressure to the downside..