FX MARKET
Calm FX Market Sparks Warning on Volatility’s Ebbs and Flows
By Lananh Nguyen
Beware the Ides of March. So goes the soothsayer’s warning in Shakespeare’s Julius Caesar, an exhortation echoed by Societe Generale SA’s Kit Juckes as he contemplated the recent pullback in currency volatility.
Investors in the $5.1 trillion-a-day FX market have plenty of sources of angst on this inauspicious day. With central-bank policies in flux, political uncertainty growing and post-crisis trading patterns breaking down, Juckes is concerned about shifts between low- and high-volatility environments.
“That’s the danger -- that vol spikes up, goes away, spikes up, goes away,” SocGen’s chief global foreign-exchange strategist said by phone from London Thursday.
A JPMorgan Chase & Co. index that measures volatility dropped to a three-year low in January, before rebounding to a nine-month high last month. It has since returned to a downward trajectory in March, touching an intraday low of 7.53 Tuesday. It was at 7.70 Thursday.
The most recent slide may disappoint for traders looking to profit from more price swings, and it can complicate matters for investors pursuing carry-trade strategies. Switching between periods of high and low volatility can therefore prove tricky to navigate.
For now, Juckes sees the major currency-market themes remaining in place, with the U.S. dollar weakening toward $1.30 against the euro as the European Central Bank gets closer to withdrawing stimulus. But as markets seek to figure out what’s next, volatility could flare up as it did last month, before disappearing suddenly again.
https://www.bloomberg.com/news/articles/2018-03-15/becalmed-fx-market-spurs-warning-on-volatility-s-ebbs-and-flows
Beware the Ides of March. So goes the soothsayer’s warning in Shakespeare’s Julius Caesar, an exhortation echoed by Societe Generale SA’s Kit Juckes as he contemplated the recent pullback in currency volatility.
Investors in the $5.1 trillion-a-day FX market have plenty of sources of angst on this inauspicious day. With central-bank policies in flux, political uncertainty growing and post-crisis trading patterns breaking down, Juckes is concerned about shifts between low- and high-volatility environments.
“That’s the danger -- that vol spikes up, goes away, spikes up, goes away,” SocGen’s chief global foreign-exchange strategist said by phone from London Thursday.
A JPMorgan Chase & Co. index that measures volatility dropped to a three-year low in January, before rebounding to a nine-month high last month. It has since returned to a downward trajectory in March, touching an intraday low of 7.53 Tuesday. It was at 7.70 Thursday.
The most recent slide may disappoint for traders looking to profit from more price swings, and it can complicate matters for investors pursuing carry-trade strategies. Switching between periods of high and low volatility can therefore prove tricky to navigate.
For now, Juckes sees the major currency-market themes remaining in place, with the U.S. dollar weakening toward $1.30 against the euro as the European Central Bank gets closer to withdrawing stimulus. But as markets seek to figure out what’s next, volatility could flare up as it did last month, before disappearing suddenly again.
https://www.bloomberg.com/news/articles/2018-03-15/becalmed-fx-market-spurs-warning-on-volatility-s-ebbs-and-flows
