A timely reminder / warning from Bank of America on thin end of year FX markets

Bank of America Global Research:

• “As the year-end holiday period approaches, we caution investors on the potential widening of FX spot bid/ask spreads in the last week of December.
• Using hourly WM/Reuters bid/ask FX spot data from 2014 to 2020, we find bid/ask spreads historically widened the most on December 26. Bid/ask spreads for FX spot prices stayed wide for the remainder of the year and only saw normalization after January 2″
• 
  “Lastly, amid illiquid FX trading conditions, the USD has historically depreciated versus the G10 complex at year-end, with the JPY and Scandies making the most year-end gains”

Santa liquidity faceplant:

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