Dukascopy Bank Team
Dukascopy Bank SA
Relative Currency Strength
After a confident rise in the previous week, the Greenback began to lose ground and became the second worst performer of the period, overtaking only the pound. Among the losers were also the single currency and the yen, whose indexes lost 0.47% and 0.29%, respectively. The safe-haven currencies were oscillating throughout the period and finished the week in the negative area. The counterweights to them were the commodity currencies, the Kiwi and the Loonie, whose gauges became much more successful and finished the week with 1.08% and 0.88% gain, respectively. The fluctuations of the commodity prices were driving the Aussie, too, but after the Friday’s drop the AUD Index managed to recover only to 0.01 mark.
The USD Index reached the period’s high on Monday, after the encouraging US core personal consumption expenditures and personal income data came out. However, afterwards the dollar was showing the downward trend till the end of the week. A notable drop of the index was observed on Thursday, when the unexpected decline of the US ISM PMI and prices paid managed the index to lose 0.2 points. Nevertheless, the main driver of the week for all observed currencies was the Friday’s US news. Thus the unexpectedly low US nonfarm payrolls pushed the Greenback down, and the index lost 0.74 points.
Volatility
The market’s volatility continued to pick up, with most of the observed overturbulence portions climbing above 30% and average index values scoring around 0.90. The most turbulent currency was the Swedish krona, whose gauge spent 42% of time above the two-week average and posted the mean value of 0.98. Behind it were the Euro and the franc, both with readings of 35% and 0.93. Meanwhile, the dollar stood among moderately turbulent currencies, but its index reached the period’s highest peak of 4.51 with the currencies sharp reaction to Friday’s labor data. The move was also passed to the Greenback’s peers, making all other indexes jump to their week’s highs.
The past week would have been another period of moderate volatility if it wasn’t for the Friday’s disappointing US nonfarm payrolls release, which pushed the aggregate turbulence measure up to 2.85 points and kept it above the 1-point mark for the rest of the day. As the number came out notably below expectations and the previous reading suffered a negative revision, the dollar plunged against its counterparts, taking its volatility index above the 4.50 line from 0.58 points before the release. Among the dollar’s pairs, the sharpest reactions came from EUR/USD and USD/JPY, whose turbulence measures jumped to 8.28 and 7.55 points, respectively.
Currency Significance
The past trading week was another period of weak correlations between the USD pairs, reflected clearly in low composite’s values. The distributions of all the components with USD/EUR were notably skewed towards zero and the negative values. Moreover, considering the Monday to Thursday period, the average of the composite did not reach even the 0.2 level, while the Kiwi’s and the Aussie’s gauges were varying around the 0.72 and 0.58 levels, respectively, having the strongest bonds between their currency pairs.
The Greenback’s composite started the week on the second weakest position, but improved slightly after Core Personal Consumption Expenditures rose 1.3% year-on-year, surpassing previous estimates, and mixed personal income and spending data was released. However, the gauge dropped by the beginning of Tuesday’s European trading session and met the week’s low on 0.07 points level, as the Euro and the Pacific currencies became the main driving power on the market. The measure rose slightly on Thursday, when the US dollar dipped on the release of lower-than expected ISM manufacturing PMI. However, the most conspicuous surge of the composite took place on Friday. The gauge reached the high of 0.66 points just after the nonfarm payrolls were announced significantly below expectations.
This overview can be used only for informational purposes. Dukascopy SA is not responsible for any losses arising from any investment based on any recommendation, forecast or other information herein contained.
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