US and Brazil to the rescue of volatility - Natixis
|René Defossez, Research Analyst at Natixis, explains that a few days ago, volatility in the financial markets was at very low levels, but the political risks in the United States and Brazil have changed the situation.
Key Quotes
“The VIX had been fluctuating for several weeks below 11%, and the V1X had been around 12%. One month implied volatility in EURUSD was no more than 6.7% a week ago. Volatility of swaptions was very low too. However, the political risks in the United States and Brazil––two countries in which the question of the impeachment of the President has been raised–– have changed the situation and reintroduced nervousness to the markets.”
“Investors are wondering in particular, as far as the United States are concerned, about the capacity of the government to implement its economic agenda (especially corporate tax reductions) in such a noxious political context: it’s no coincidence that last Wednesday, the S&P 500 had one of its sharpest one-day falls for a long time. Of course, at the same time, Tnotes behaved very well, and the US rate curve flattened sharply by the top. A priori, the Fed should remain relatively insensitive to this new political context, and should continue its return to normal monetary policy.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.