Forex Markets Face Thin Liquidity Ahead of Holiday Break

UPDATE: Forex markets are experiencing significant volatility this morning, December 22, 2025, as liquidity remains extremely thin ahead of the holiday season. With many wholesale market participants already closed, traders are advised to proceed with caution as prices are likely to fluctuate dramatically.

Market liquidity is diminishing significantly, and retail traders should be especially vigilant until January 5, 2026, when most trading activity is expected to resume. The absence of other time frames (OTF) during this period could lead to choppy trading conditions. For those involved in retail trading, it may be wise to conserve capital and avoid unnecessary risks until the new year.

The calendar is nearly empty today, with few economic events on the horizon. The anticipated rate-setting decision by the People’s Bank of China (PBOC) is considered a non-event, as China’s Loan Prime Rates (LPRs) were held steady in November 2025. This marks the sixth consecutive month without any change, with both the one-year and five-year LPRs last adjusted by 10 basis points in May.

The current 7-day reverse repo rate stands at 1.4%, serving as a principal benchmark that influences other lending rates, including the LPRs. The PBOC utilizes these open market operations to manage liquidity in the banking system, which is particularly crucial during this holiday period when trading volumes are low.

As the markets prepare for a quiet week, investors should stay tuned for any unexpected developments. With coverage on investing platforms like InvestingLive expected to diminish until January 5, traders should prioritize risk management strategies during these uncertain conditions.

Stay alert and informed as we continue to monitor the evolving situation in forex markets.