Month-end flows could influence trading as conflicting bank signals emerge

Let's get straight to the point. You might have missed these calls from last week:

• Month-end fixing to be mildly supportive of the dollar - BofA
• Some slight dollar selling likely to be the case for this month-end - Credit Agricole

It is unusual to see banks sending opposing signals based on their month-end rebalancing models. But this has happened before and will happen again.

What should traders take from this? As noted in one of the shared posts:

"It is best to remember that there is no exact science in deciphering or making sense of the impact of these rebalancing and fixing flows. I will always point out the notes from the banks when I can, but they are more of an elective signal. These are by no means hard and fast calls that point to what will exactly happen when we get to month-end trading and/or closer to the London fix during this period.

For this month, Credit Agricole and BofA both argue that month-end action will likely be more subdued. Even with conflicting signals, they only suggest that any effects from these flows are not expected to be significant. Still, there is no certainty that one of them will be correct.

Ultimately, this is just one small factor in how price action unfolds. It is similar to viewing the FX option expiries list. Overall dollar sentiment, technical considerations, and other fundamental factors are equally important.

The signal is merely an extra tool to keep handy, in case you need more details for informed trading decisions at month-end. That is all there is to it."

Keep that in mind as we approach the final day of August trading, with a clearer sense of actual market flows and sentiment perhaps starting tomorrow. But there is little time to settle in, with US non-farm payrolls due on Friday. It is a tricky period, as Fed odds for September now appear close to a coin flip after Jackson Hole.