Market activity at the start of the FX week is characterised by thin liquidity until more Asian markets open, leading to potential price fluctuations. Caution is advised for traders as this environment can result in unpredictable movements.
Recent data from China shows a February Consumer Price Index (CPI) at -0.7% year-on-year, below the expected -0.5%. This outcome reflects deflationary pressures on consumers while signalling a possible need for increased policy stimulus from the central government to support spending.
Indicative Currency Rates
Indicative currency rates remain relatively stable compared to late Friday: EUR/USD at 1.0836, USD/JPY at 147.93, GBP/USD at 1.2917, USD/CHF at 0.8797, USD/CAD at 1.4371, AUD/USD at 0.6309, and NZD/USD at 0.5711.
With the week now underway, liquidity remains light in the early Asian session, often leading to unpredictable price movements before additional markets come online. These conditions can enhance volatility, particularly for those looking to establish or adjust positions before broader trading activity picks up. It remains essential to recognise that price swings during these hours may not always reflect sustained sentiment but rather short-lived reactions to available order flow.
This morning’s inflation release from China underlines ongoing deflationary pressures. A -0.7% year-on-year reading for February, softer than the anticipated -0.5%, points to reduced consumer demand. When prices fall at such a pace, purchasing behaviour can shift as businesses and households anticipate lower costs ahead, potentially weighing on economic activity. The figures reinforce expectations that policymakers will need to step in with stronger measures, whether through fiscal easing or central bank action, to counteract weakening price trends.
Despite these developments, key currency pairs remain broadly stable. The euro-dollar pair is holding near 1.0836, while sterling maintains a position around 1.2917 against the dollar. The yen sits just below 148 per US dollar, while the Swiss franc remains near 0.8797. The Australian and New Zealand dollars trade at 0.6309 and 0.5711, respectively, reflecting little immediate impact from China’s data.
Market Sentiment And Liquidity
For those monitoring short-term opportunities, attention should remain on how market participants react as liquidity normalises. Early movements may not fully capture sentiment, making it prudent to assess whether trends persist as Europe and North America join the action. With upcoming data releases and policy expectations shaping decisions, staying aware of shifting momentum will be key to positioning effectively in the days ahead.
