The remarkable thing about yesterday and also this week is just how little the single currency has reacted to a 4% correction in European stocks (Eurostoxx 50 index) over the past 5 sessions. The single currency is unchanged over this period and has held within a 60 pip range. Yesterday, there were echoes of days gone by, with concerns over the stability of the Portuguese Bank Espirito Santo. Trading in their shares was suspended after a 17% decline. Still, given the pervasive low levels of volatility in many asset classes, this is perhaps the reminder than is needed to illustrate that risk still exists in many different forms. Bond yields were higher, with the Italian 10Y now at 5 week highs just below 3%. An orderly correction in these markets should largely be welcomed, together with a reconsideration of risk across all markets.
At least in equities, there is a seasonal pattern over the past 5 years towards greater volatility during the latter half of July and August (VIX). This is less so for FX, although 2011 stands as the main exception to this. Ultimately, what is going to bring back volatility to FX will be changes in monetary policy and better still, changes in interest rates. We’ve seen the expectation of a move this year increase for the UK and also the debate surrounding the first hike in the US continue to become more vocal.
For today, eyes will remain on developments in Portugal and further potential comments from officials. On the majors, the CAD stands out, USDCAD just above the lows of the year at 1.0621, with labour market data released today. Stronger numbers could well push USDCAD through this level, but the momentum of recent weeks suggests that such a move could struggle to be sustained.
FxPro UK Limited is authorised and regulated by the Financial Services Authority, registration number 509956. CFDs are leveraged products that incur a high level of risk and it is possible to lose all your capital invested. Please ensure that you understand the risks involved and seek independent advice if necessary.
Disclaimer: This material is considered a marketing communication and does not contain, and should not be construed as containing, investment advice or an investment recommendation or, an offer of or solicitation for any transactions in financial instruments. Past performance is not a guarantee of or prediction of future performance. FxPro does not take into account your personal investment objectives or financial situation. FxPro makes no representation and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied by any employee of FxPro, a third party or otherwise. This material has not been prepared in accordance with legal requirements promoting the independence of investment research and it is not subject to any prohibition on dealing ahead of the dissemination of investment research. All expressions of opinion are subject to change without notice. Any opinions made may be personal to the author and may not reflect the opinions of FxPro. This communication must not be reproduced or further distributed without the prior permission of FxPro. Risk Warning: CFDs, which are leveraged products, incur a high level of risk and can result in the loss of all your invested capital. Therefore, CFDs may not be suitable for all investors. You should not risk more than you are prepared to lose. Before deciding to trade, please ensure you understand the risks involved and take into account your level of experience. Seek independent advice if necessary. FxPro Financial Services Ltd is authorised and regulated by the CySEC (licence no. 078/07) and FxPro UK Limited is authorised and regulated by the Financial Services Authority, Number 509956.
Recommended Content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.