This week, the FX market has a light schedule for economic events, starting with a quiet Monday. On Tuesday, we’ll see minutes from Australia’s monetary policy meeting and comments from Bank of England Governor Andrew Bailey. In the U.S., Federal Reserve Chair Jerome Powell will open a conference, with a blackout period starting for the Fed ahead of the July 30 FOMC meeting. Wednesday will bring data on existing home sales in the U.S., while Thursday will showcase flash services and manufacturing PMIs for Japan, the eurozone, the U.K., and the U.S.

Eurozone Economic Events

The eurozone will announce its latest ECB monetary policy decision. On Friday, Japan’s Tokyo core CPI (year-on-year) will be released, along with the U.K.’s retail sales (month-on-month) and the U.S.’s durable goods orders (month-on-month). Existing home sales in the U.S. are expected to dip slightly in June, while new home sales may bounce back. The ECB is likely to keep the deposit rate at 2.0%, with Wells Fargo predicting a possible rate cut in the future. The consensus for Tokyo’s core CPI (year-on-year) stands at 3.0%. Although food prices are easing, inflationary pressures remain. In the U.S., durable goods orders are expected to drop significantly in June, largely due to a previous spike in aircraft orders. However, core durable goods orders may stay flat, and business equipment investment could shrink later in the year. With a light economic calendar, we expect low implied volatility early in the week, making it a good time to set up positions rather than chase trends. While Mr. Powell enters his blackout period, his comments on financial stability could still lead to unexpected market movements. We will monitor options pricing closely for traders anticipating surprises from his speech.

U.S. Economy and Federal Reserve Insight

We expect Wednesday’s existing home sales data to confirm a slowing U.S. economy due to high interest rates. Recent numbers show the 30-year fixed mortgage rate remains high, around 6.89% in early July, supporting the idea of a slight dip in sales. This continuing weakness in housing suggests that the Federal Reserve may feel pressured to consider rate cuts later this year, which we can express through interest rate futures. The anticipated sharp decline in durable goods orders on Friday will be crucial for us. We’ll focus less on the large headline number, which is skewed by a big Boeing deal in May, and more on the core figure for insights into business investment. A weak core reading could mean companies are cutting back on spending, creating potential selling pressure on industrial sector stocks and related assets. For the euro, we believe the ECB’s decision to hold rates will stabilize the situation in the short term. However, the possibility of future rate cuts, combined with ongoing U.S. tariffs, poses risks for the currency in the medium term. This makes longer-dated put options on the EUR/USD a sensible strategy to hedge against potential challenges. Friday’s inflation data from Tokyo will be crucial for the Japanese yen. A higher-than-expected reading could shake the market’s belief that the central bank will delay policy changes, likely strengthening the currency rapidly. With the USD/JPY recently at multi-decade highs near 160, we are prepared for significant volatility around this announcement. For the British pound and Australian dollar, we’ll focus on subtle changes in forward guidance rather than major data points. Comments from Governor Bailey and the release of Australia’s monetary policy minutes could signal shifts in policymakers’ tones. We will analyze their language closely for signs that either central bank is moving closer to or further from future rate changes. Create your live VT Markets account and start trading now.

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