FX volatility: It’s quiet, but is it too quiet? - CIBC


Analysts at CIBC, consider that the low volatility in the currency market is out of line with high uncertainty indications and they noted economic uncertainty is driven largely by China.

Key Quotes: 

“Similar to measures of equity market volatility, FX volatility has fallen again and is close to being at the lowest level since 2014. That lack of volatility initially appears at odds with measures of global economic uncertainty. However, it may be easier to explain for FX markets than equity ones. The greatest source of uncertainty recently has stemmed from China-US trade relations, which is now getting closer to a resolution and has the greatest impact on a currency pair whose daily fl uctuations are highly smoothed by Chinese policymakers. Meanwhile the risk of a negative impact on sterling from a “hard” Brexit has also fallen in the past week. Being able to explain at least part of the divergence between uncertainty and low FX volatility could also mean that volatility need not fall further if some of these risks dissipate.”

“Another reason for the low volatility at present could be that speculative traders don’t have a great conviction towards any of the major currencies, given slowing economic trends and ongoing risks. Indeed, recently the spread in net positioning either for or against fi ve major currencies has been remarkably slim. As demonstrated by sterling this past week, even a glimmer of good news (reducing the risk of a hard Brexit) can have a large FX impact.”

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.

Feed news

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!


Latest Forex News

Editors’ Picks

EUR/USD: Bulls need an upbeat German IFO Expectations figure

EUR/USD dips as lingering US-China tensions bode well for the US dollar. Technical indicators suggest scope for a re-test of the lower end of the multi-week trading range. Deeper losses may remain elusive if the German IFO numbers beat estimates. 

EUR/USD News

GBP/USD retraces three-day losses below 1.2200 on UK/US holiday

GBP/USD sellers catch a breather amid a lack of major catalysts on Spring Bank Holiday. UK PM Johnson gets criticized while favoring Adviser Dominic Cummings. US-China tussle intensifies with eyes on US President Trump’s reaction over the Hong Kong issue.

GBP/USD News

Forex Today: Dollar in demand amid high Sino-American tensions, thin liquidity expected

The new week has kicked off with dollar strength as the US and China have kept tensions high. Thin liquidity and potential erratic movements may occur as the US and UK are on holiday.

Read more

Gold down by $6 in Asia, weekly chart shows bullish trend exhaustion

Gold, a safe-haven asset, is flashing red at press time even though the growth-linked currencies like the Aussie dollar are struggling to gain altitude. Technical charts indicate scope for deeper declines in the short-term.

Gold News

USD/JPY keeps mild gains above previous resistance line, 200-HMA

USD/JPY bounces off an immediate support line to print a three-day winning streak. Thursday’s high appears on the bulls’ radar as immediate resistance. 107.00 could lure the bears below 200-HMA.

USD/JPY News

Forex MAJORS

Cryptocurrencies

Signatures