It is that point of the month once more with solely two days left in July buying and selling now. As at all times, the month-end flows could already be slowly enjoying out however there may nonetheless be some added volatility particularly once we get to the London repair earlier than all is claimed and executed. And that’s what merchants should be ready for simply in case.
Alongside the combination of volatility from different key occasions this week, it makes for a really messy interval in digesting value actions. So if the danger ranges are to not your liking, you is perhaps higher off ready till subsequent week for the mud to settle and for extra readability. Typically one of the best commerce is to guard your capital and never take pointless dangers that do not fit your danger profile/tolerance.
Anyway, again to what to anticipate this month-end. Credit score Agricole factors out that we may see some delicate greenback shopping for into the repair this time round:
“International fairness markets have been considerably combined in July. In FX, the USD was considerably combined on the month as nicely. Total, the strikes in fairness markets, when adjusted for market capitalisation and FX efficiency this month, counsel that month-end portfolio-rebalancing flows are prone to be delicate USD shopping for throughout the board with the strongest purchase sign within the case of the USD vs the CAD.”
In the meantime, BofA didn’t single out the greenback as being the stand out primarily based on their mannequin. As an alternative, they selected to deal with the pound with rebalancing flows set to level in the direction of promoting within the forex this month-end:
“We estimate FX rebalancing wants primarily based on a traditional 60/40 portfolio of world equities and bonds. Our estimates level to outperformance of GBP denominated property over July. This scope for rebalancing out of GBP (-1.5σ) and comparatively muted inflows into EM and different DM denominated currencies (ex-JPY).”
As at all times, these are by no means set in stone however they simply supply some indication of what may transpire. Nonetheless, simply understand that this must be put collectively alongside different components driving market circumstances too. On this case, I’d argue that the post-Fed response, tech selloff, and US-Iran developments are additionally nonetheless notable drivers impacting value motion as an entire.

