Winding down

26 July, 2016

The single currency has fallen out of the limelight, largely because there have been more dominant themes driving most of the other majors currencies in recent weeks. It’s also notable that it’s been moving away from having interest rate as the primary driver. The one month rolling correlation between EURUSD and the 2Y interest rate spread between the US and Eurozone has moved into negative territory for the first time since early 2015. Normally the positive correlation corresponds to the euro outperforming should 2Y government bond yields move in the euro’s favour. The fact that this relationship has broken down suggest that interest rates aren’t the main driver of the single currency at present. More interestingly the trading range of EURUSD has been declining, the simple 2 week average true range having fallen to nearly the lowest level of the year so far, reflecting the generally lower volatility. This now stands at 70 pips. It has also remaining within the range traded on the day after the Brexit vote, whereas other majors have broken out one side or the other.

We’re likely to see activity on the low side again today, as most are waiting for the outcome of the Fed meeting tomorrow and more so the BoJ meeting at the end of the week. Data is on the light side, with just US house price data and consumer confidence later in the day. The main move overnight has been on the yen, strengthening into the BoJ meeting later this week. This took the shine off the stock market, with Nintendo shares also falling further on the common relalisation that monetising apps is not easy, even when everyone seems to be trying to kill themselves by chasing virtual monsters round the streets.


Source link  
All Eyes on Central Banks

Markets were, for the most part, little changed on Wednesday as traders waited for today’s Bank of Japan and ECB rate decisions. Earlier today...

Dollar Bears

UK Consumer Price Index (CPI) data was released on Tuesday showing inflation easing for the first time in nearly 10 months, retreating from the near 4-year high touched in May...

More Record Highs for Equities?

Early indications from Asia this morning are pointing towards a strong day for global equities, continuing the momentum from last week...


US Data brings on USD bulls

U.S. job growth surged more than expected in June and employers increased hours for workers, with signs of a labor market strengthening that is likely...

Biggest Quarterly Drop in 7 Years

USD recovered marginally on Friday, but had its biggest quarterly decline against several currencies in nearly 7 years following hawkish signals...

Markets look to Central Bankers

Asian Equities traded higher on Tuesday approaching near two-year highs on Tuesday as USD strength helped exporters...


Global Economic Optimism Continues

Global equities moved higher on Monday as optimism continued to improve on global economic growth. However, USD...

BOJ Monetary Policy Remains Steady

The Bank of Japan maintained their monetary policy on Friday whilst upgrading their assessment of private consumption...

Final Confirmation for a June Rate Hike

The crucial US labour market data for May will be released today, June 2nd at 13:30 BST. It includes non-farm payrolls...

  


Share: