#AN024: "Light" August, Heavy FOREX Data
August is unforgiving: thin liquidity, but a heavy macroeconomic environment. This week, the July US CPI (Tuesday, August 12, at 2:30 PM CET) is the event that could reshape mid-month FX flows; it comes after weak payrolls and with the "tariffs → inflation" theme once again front and center. Hello, I'm Andrea Russo, an independent Forex trader and prop trader with $200,000 in capital under management. Thank you in advance for your time.
The BLS confirms the release calendar (July to August 12), while desks and media are warning of tariff-induced inflation risk and a market pricing in Fed cuts in September.
US: CPI, Tariffs, and the Pricing of Cuts
The stock market has rebounded, but the week will hinge on CPI and PPI: if tariffs boost tradables, the "mini-stagflation" scenario (stagnant inflation and slowing growth) becomes credible and supports the USD in risk-off mode; a soft CPI, however, reinforces the Fed's pricing of a cut and could weigh on the greenback. Currently, traders are looking for a low monthly CPI but with the risk of a downturn due to tariffs.
Europe: ECB Steady, EUR "Still Anchored"
The ECB left rates unchanged on July 24, with the message: inflation at target in the medium term, domestic pressures declining, wages slowing. This "anchor" the EUR: less endogenous macro direction, more dependent on Tuesday's US data. Range-trading is likely ahead of the US CPI; a hot surprise pro-USD pushes EURUSD down, while a soft surprise rebounds it.
UK: BoE cuts to 4% — sterling more "data-dependent"
The BoE has cut by 25 bps to 4% (the fifth time this year) and in its Monetary Policy Report, it predicts a transitory inflation peak of 4% in September before returning. FX translation: GBP loses its "carry edge," becoming sensitive to labor/price data; against the USD, it remains hostage to Tuesday's CPI; against the EUR, it tends to smooth out excesses (less interest rate premium). Disciplined sell-the-rally on GBP/USD if US CPI surprises to the upside; conversely, a soft CPI could trigger short-covering on sterling.
Japan: BoJ patient, but the "more is possible" theme
The June minutes show a BoJ willing to reopen the hike discussion once the trade shocks related to US tariffs subside. In the summer, with intermittent risk-off, the JPY remains bid on negative shocks and warm US data (real yields ↑), and weakens if the CPI reinforces the Fed cut scenario (US yields ↓). USD/JPY sensitive to the term premium: it rises with a hot CPI, retreats with a soft CPI and risk-off.
Australia: RBA under dovish pressure
Consensus strengthens for an RBA cut (after the "no cut" in July): core disinflation and cooling jobs provide coverage. AUD feels the combination of Fed pricing + RBA risk: hot US CPI = AUD down twice (strong USD + dovish RBA); soft CPI = technical rebound, but capped if the RBA actually cuts.
China & commodities: PPI in deflation, lighter oil
China remains disinflated: CPI flat y/y and PPI -3.6% y/y in July. This is a cyclical headwind for FX commodities and, by extension, mitigates near-term global inflation risks. Oil is correcting on demand concerns and the OPEC+ headline; lower Brent is supporting the "soft US CPI" scenario on the sidelines.
