Dukascopy Research Thread

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Our new Quarterly Report issue is finally here!

Supposedly, no one would argue that an economy, especially a global one, is far too complex – far beyond anyone’s full comprehension. It resembles a bunch of gears with varying diameter and number of teeth, connected together in one enormous contraption. Meanwhile, the policymakers are the ones who take part in the mechanical reasoning test and turn the first wheel to guess direction and speed of the last one, the wheel of economic growth. The problem is that for the time being they seem to be unable to figure this one out. So once again, the conclusion is that we have to be patient and we will have to wait a little more.

There was an excessive amount of pessimism in our report last quarter, and to say the truth, it has not gotten noticeably better since then. It is a pity, but we had to reject a picture with a vast green valley and clear blue sky for the title page of this issue; instead, we decided go with the one you just saw. Everything seems to be crammed, everything seems to be blocking our view, and hardly anyone has a full grasp of the current situation, so it made a lot more sense.

It does appear that the United States are weathering the adverse environment successfully, but we have to admit that one country, however large in terms of economic output, will not be able to drag the whole world along with it. There has to be some positive reinforcement, and there is none. The potential engine of global recovery, China, is busy dealing with the stock rout and low business confidence, and it is highly unlikely to meet the expectations. Nobody seems to believe now the possibility of China bailing out the Eurozone, something that was very common in the news several years ago. It might be a bad habit to start the new year with this much gloom, but there is still no break in the clouds. And even if there is one, it might not last long, given how unstable the clouds are.

Do not get us wrong, it is not all black, but the there is little reason for optimism. Still, it is possible to find some positives in this, especially for traders, who depend not so much on the well-being of the economy, but are a lot more flexible in this regard. The unstoppable bearish trend in oil prices and slowdown in China create unique possibilities. Volatility is not only elevated at the moment, but new great opportunities now present themselves during the Asian trading hours, too. Use them well.

Trade thoughtfully and take care,
Dukascopy Research Team

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Full research is available here.

Highlights of the latest Market Research on USD:

During the week the Greenback was one of the most stable currencies as it was steadily appreciating while its counterparts experienced significant ups and downs. Just like during the first January’s trading week, the Australian dollar coupled with its regional peer Kiwi posted the most conspicuous rate changes. The currency indexes started the week with a slight recovery after the previous week’s 4% loss. However, on Wednesday, coupled with another commodity currency – the Loonie – the indexes slumped by 1%. Less pessimistic than expected Australian employment data made the domestic currency to appreciate on Thursday. Nevertheless, the effect was short-lived, and another drop of oil prices was followed by even more significant depreciation of the associated currencies. As a result, the Canadian dollar finished the period with the 2% loss. Meanwhile, the safe-haven yen gained 2% in one day and became the best performer of the week.

For a second week in a row portion of elevated market volatility reached the extremely high 70% level. However, the dollar was notably “underturbulent” compared to the market, holding its volatility measure below the composite index for the whole past trading week. Its elevated volatility portion and average turbulence also lacked behind all its peers. The least stable, in turn, were the Asia-Pacific currencies. The Aussie and the yen kept their volatility indexes above the historical average for 80% of time. Such activity reflected the unstable situation on the commodity and stock markets.

Absence of the influential news releases on the US dollar as well as the overall economic situation on commodity and stock markets was reflected in extremely low USD composite’s values. The notable weakening of the bonds between commodity currencies and safe-haven currencies was observed. Thus USD/EUR correlations with USD/AUD, USD/CAD and USD/ NZD held in negative area and averages of these components lost about 0.5 points compared with the long-term values. As a result, the average value of the composite has been cut almost in half compared to the monthly value.

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Highlights of the latest Market Research on GBP:

The market was again divided into two groups of weekly gainers and losers. As the equity market rout continued earlier during the last days of the previous week, we observed all risky currencies dropping down. Among them, Australian and Canadian dollars were traditionally following sliding oil prices that tested the area below $28 per barrel. AUD and CAD were down by 0.84% and 1.65%, respectively. New Zealand Dollar could end the period on a more optimistic note, but tumbling dairy prices (main industry in New Zealand) sent this currency to the South by more than 2% on a five-day basis.

Being that global stock and commodity markets remained largely turbulent throughout the whole period, their activity was transferred to the FX market as well. Therefore, elevated volatility held above 50% for the Pound and for the market, namely at 59% and 58%, respectively. Even though last Wednesday we were looking at the Canadian Dollar, it did not change the fact that the most volatile cross still includes the Japanese Yen for a second consecutive week. GBP/JPY was volatile in 68% of all time, with Pound/Aussie following at 62%. Mean Volatility Index has therefore surged up to 1.12 points, supporting the case of unstable market conditions during the period.

Significance of the Sterling has just barely exceeded its medium and long-term averages during the five-day period ended January 19. In particular, we see that the main trigger for that was development that took place on Tuesday when the composite experienced a healthy increase. Mean correlation coefficient stood at 0.38 points last week, up only two basis points from an annual average of 0.36. Some specific currency pairs, especially those including commodity-related components, even posted negative period’s correlations. They ranged from –0.16 points for EUR/GBP and GBP/AUD, to –0.03 points for EUR/GBP with GBP/NZD.

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Highlights of the latest Market Research on EUR:

Euro was one of the best performers last week. It came virtually at par with Swiss franc and Greenback and was surpassed only by the Yen. All of the other currency indices lagged at least 1% behind the Euro. From the very beginning Euro index showed strong commitment to be amongst the best performers in the period. It ended Friday 1.1% above the base while losing additional points the next day. On Tuesday the latest inflation data from the Euro zone failed to set direction for the pair and it remained at it lows of the period. Annual euro area inflation remained stuck at mini-growth in December.

Levels of volatility remain rather moderate. Elevated volatility (above the usual (long term value; 1.0 in the index scale) is being observed in 55%, or more, of the time in a clear majority of the cases (market and individual currency pairs). In addition, average volatility is at 92 to 131% of the long term level. Highlight of the period, in terms of volatility, as anticipated, was observed on Thursday. We saw three peaks in market volatility (2.3, 2.1 and 4 times higher than the usual level). First one is attributable to the poor US retail sales. The second one, after the publication of the US inflation report, even though it missed expectations.*

Significance of the Euro, measured as an average correlation between various Euro crosses, was mixed in the period of analysis. The gauge started the period at 0.61 and ended it at 0.68. The change in the gauge in the period was pretty surprised with one major recovery at the end of the week. Average correlation was steadily decreasing until Thursday affected by economic announcements from the different regions. As surveyed, the ECB decided to maintainthe lending rate at a record low level of 0.05%, along with the deposit rate remaining at -0.30%.

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Highlights of the latest Market Research on USD:

The active stance the observed currencies have taken in the beginning of the year continued to reign over the market, and the strength indexes once again produced a wide range of weekly change. The period’s leader was the Loonie, whose gauge posted a 3% gain, paring the previous week’s loses with an impetuous rally. Starting with the BoC’s decision to not cut the rate on Wednesday and finding support in the bounce of the oil prices further in the week, the upsurge swiftly took the CAD Index above its peers and put it more than 1% ahead of the closest counterpart by the end of the period. The said counterpart was the Aussie’s gauge, which had a bumpy start of the week after the January 15 downslide, but picked up alongside its Canadian counterpart. Meanwhile, the main losers of the period were the EUR, the CHF, and the JPY Indexes, which fell sharply on Thursday and remained under the downward pressure in the following day.

Against the background of extremely turbulent first weeks of the year the past week seemed almost normal, as average of the volatility measure was very close to 1 as well as portion of elevated volatility close to 50%. Thus, turbulence of the week was in line with that of the previous two, which means that the currency market stayed under pressure of oil price movements as well as worries about the Chinese economic situation. Just like previously, the Asia-Pacific currencies remained the most volatile with more than 55% elevated volatility portions. Meanwhile, there were two more currencies – the Loonie and the Euro – which conspicuously reacted to domestic economic releases.

The period of the negative relationships between the Greenback’s pairs has continued for the third week in a row. The commodity market still aroused a dissonance in the currencies’ movements. Compared with the previous week, the average of the US dollar’s composite lost 0.04 points. For most of the USD/EUR components the past period also was unsuccessful, and the averages decreased by 0.06-0.22 points. Meanwhile, the averages of the components containing the Pacific currencies and the Loonie gained 0.04-0.07 points.

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Highlights of the latest Market Research on CAD:

The total number of economic events was declining every day throughout the period ended Jan 26. Despite that, currency markets were kept in volatile mode due to other factors. They included continuous instability in global equity markets, even though we have seen some improvement of the situation after the ECB and the PBOC said they will provide more support. Additionally, oil prices are still hovering near $30 a barrel. The latter fact, however, failed to derail commodity-linked crosses including the Canadian Dollar. Joined by the Aussie and Kiwi, they managed to become the best performers during the previous week and gains were held above one percent.

Wednesday of the previous is clearly showing that Canadian events used to have great deal influence on the domestic currency. Indeed, the Bank of Canada’s moderately-surprising decision created the most visible part of daily action. As we have mentioned before, the number of daily events had been falling every day and this fact was reflected in volatility of both the Canadian Dollar and the market. Tranquil Monday and Tuesday affected the overall weekly readings for elevated volatility, which stood at only 36% and 33% for CAD and market, respectively. Compared to our previous report on this currency, there has been a clear slump from 70-80% seen two weeks ago.

Significance of the Canadian currency exceeded all possible short and long-term average indicators last week, helped by mainly unanimous and united market reactions of various CAD crosses to fundamental events from Canada and abroad. As seen from the mean correlation coefficient table, the average correlation between currency pairs stood at 0.58 points, well above the 20-day average of 0.51 and annual mean of just 0.43 points. With EUR/CAD the most correlated currency pairs normally include US Dollar, Japanese Yen and Swiss Franc due to the safe haven status of these currencies and the Euro.

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Highlights of the latest Market Research on EUR:

After a plunge amid more favorable data from the US and anticipation of further action by the European Central Bank on January 22 and some wobbly movements on the following Friday, the EUR Index rushed through the new week on an uptrend, ultimately becoming one of the best performer of the period. The single currency posted modest weekly loses against the pound, the Canadian dollar and the krona, whose indexes held in the appreciation area throughout the whole period, but managed outperform notably the Pacific currencies and the Swiss franc.

In spite of the fact that the period was rich with influential economic events, the market volatility during the period was mostly below the historical level and slightly exceeded it only in 15% of time. However, on Thursday, at the end of the observed period the Euro’s volatility skyrocketed significantly almost above the historical level. Such a strong reaction started after the Federal Reserve decided to keep interest rates unchanged between 0.25% and 0.50%, following the first rate hike from the record low in a decade.

The period was marked by an increase in the average values of all observed correlation pairs. The most noticeable strengthening was observed in the bonds between EUR/USD and the EUR/JPY as well as EUR/CHF. Changes of the average EUR/USD correlations with EUR/AUD, EUR/CAD and EUR/NZD, in turn, were minimal, even though the dynamics of the component was rather animate. It held at the level of 0.35, but during the weekend and at the Wednesday’s evening, sharp falls of the component were noted , bringing it as low as 0.20 and notably skewing the average.

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Highlights of the latest Market Research on USD:

The past week was full of ups and downs, but the market managed to retain its previous leaders and losers. Thus for the second week in a row the Canadian dollar became the best performer of the period, whereas the yen ended the week with a strong decrease. The BoJ’s decision to introduce a negative interest rate surprised the market, and the yen fell sharply, losing 2.4%. The commodity currencies started the period with a downward trend, but the recovering of the oil prices on Tuesday became the turning point for the Loonie and the Aussie – their indexes changed direction and finished the observed week with 1.4% and 1.0% gains, respectively.

The past week was the first one this year during which the market’s elevated volatility portion did not exceed the 50% mark, moreover, it could hardly pass the 20% level. It means that the market calmed down and there were very few events to notably affect the observed currencies. The pound and the yen became the absolute leaders in terms of turbulence, as the former posted 43% portion of elevated volatility, but the volatility measure of the latter reached the 6.0 points mark against the background of BoJ decision to put the benchmark interest rate below zero. Undoubtedly, it became the most resonant event of the trading week as both the USD and DC volatility indexes reached their 2.3 points highs, but the USD/JPY component surged above the 10.0 level.

The dollars correlation composite held firmly below the significance threshold for the fourth week in a row. The measure remained heavily influenced by the commodity currencies, whose pairs’ continued to inject negativity into the associated components. Thus, the USD/EUR correlation with USD/AUD, USD/CAD, and USD/NZD edged further down, bringing their averages closer to significant levels and signaling a well-defined opposing behavior. Meanwhile, the pair’s bonds with USD/SEK and USD/CHF lost around 0.1 points, also contributing to the composite’s weakness.

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Highlights of the latest Market Research on JPY:

Without a doubt the Japanese Yen was the worst performing currency of the period ended February 2. The Bank of Japan’s interest rate decision was quite unexpected for many market participants, while nobody had anticipated anything even similar to negative rates. BOJ Governor Kuroda had assured markets in Davos that the move was unlikely, but policymakers voted 5-4 in favour of cutting the rate from +0.10% to –0.10%. Bank of Japan is intended to combat declining inflation expectations and sluggish economic growth in the country. Following the decision, the Yen has immediately slumped 2%.

Volatility readings for the Yen are clearly reflecting everything that took place in the world’s third largest economy on Friday of the previous week. The Bank of Japan lowered the deposit rate, meaning now the commercial banks have to pay the central bank for parking cash there. The decision was followed by the Yen’s turbulence indicator spiking as high as 6.11 points, the levels we have not observed for quite some time in recent past. On the other hand, the reaction used to be short-lived, as market focus moved on to the ECB and even Fed, which is now not considered to hike rates in March. On top of that, Japan released no important fundamentals throughout other days of the period.

Different currency pairs of the observed Japanese currency correlated pretty well in course of the whole time period ended Tuesday of the first week of February. This fact is confirmed by the mean correlation coefficient, which used to hold at 0.60 points, down slightly from 0.63 points on the basis of the previous four working weeks. However, last period’s gauge has substantially overshot the 6-month and yearly averages of 0.45-0.41 points. All crosses posted higher correlations with EUR/JPY than it was usually in the past. With Euro and Swiss Franc being quite interconnected to each other, it resulted in the mean correlation coefficient of 0.81 for EUR/JPY & EUR/CHF last week, the best reading of the period compared to other JPY components.

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Highlights of the latest Market Research on EUR:

The period, which put most of the observed indexes either on or above the baseline, resulted in a 0.6% gain for the EUR Index, making it the week’s second best performer. The only peer to advance above the Euro’s measure was the New Zealand dollar gauge, which was spurred by the unemployment figures which managed to came in much better than expected, rebound in oil prices and also, due to the central bank attempts to delay expectations of the further easing. On the other side of the baseline, the Greenback became the main looser and posted a 2.04% weekly plunge, greatly affected by the weak data on factory orders for December which dropped the most in a year.

In a terms of the elevated volatility, the market and the Euro were much more volatile compared to the previous week tendency. Thus, the portions of elevated volatility of the aggregate and EUR were 32% and 27%, respectively. For the most of the components the observed period was quite turbulent. The major gainers were EUR/CHF, EUR/JPY and EUR/SEK. The highest peaks of the market and EUR volatility indexes even managed to reach 2 points. Among the components, EUR/USD, EUR/CHF and EUR/SEK managed to overcome the 2-point level. Meanwhile, the most outstanding jump was demonstrated by EUR/JPY, which skyrocketed above the 11-point level.

The period was marked by an increase in the average values of all observed correlation pairs. The less noticeable strengthening was observed in the bonds between EUR/USD and the Asia-Pacific currencies. Changes of the average EUR/USD correlations with EUR/JPY were minimal, even though the dynamics of the component was rather animate. It held at the level of 0.51, as the Yen was on the back foot after the Bank of Japan unexpectedly decided to cut its benchmark rate into the negative territory.

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Highlights of the latest Market Research on USD:

The observed currency indexes posted another wide range of weekly changes, with some of the measures turning tables on their previous results. The most notable change of mind was showed by the yen’s gauge, which was pushed 2.5% below the baseline by the BoJ decision to introduce a negative interest rate on January 29. Then the index became the period’s worst performer, but in the past week it managed to pare some of the losses, posting a 2% growth over the base value. Similarly, the previous week’s second worst, the CHF Index, became the second best. The Euro’s gauge, in turn, remained on the third position. Meanwhile, the previous winners, the Loonie’s and the Aussie’s measures, lost the momentum and fell into the bottom-3.

Against the background of the rather turbulent second half of January, the Volatility Indexes showed quite weak activity in the past period. In terms of elevated volatility, the British pound became the most changeable currency among its peers, spending about 31% of the time above the historical level. The most tranquil, in turn, was the yen with only 11% of elevated volatility. Thus the portion of elevated volatility of the market was 20%. The Greenback held above the 1-point line for a quarter of the period and had the second highest volatility peak, losing only to Loonie, which managed to surge to 2.38 mark.

The first week of February brought some improvement to correlations of the USD pairs. The average of the Greenback’s composite gained 0.2 points and came closer to the long-term value. However, it did not mean that the picture changed significantly, as the commodity currencies coupled with the yen continued to hold on leading positions. The US dollar’s composite with its European counterparts stayed behind while the pound was the only one which could compete with the pacific peers. The currency strongly reacted to the manufacturing PMI and the interest rate releases, which made its significance measure hold around the 0.5 level.

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Summary
[ul]
[li]The global economy entered into 2016 on a wobbly footing, with China sending jitters around the world. China’s economy in 2015 grew 6.9%, the slowest pace in 25 years. The world’s second biggest economy saw a difficult start to the current year, which included financial markets closure on two occasions as steep declines of more than 7% triggered market circuit breakers and a halt to trading. These developments had a devastating impact on business and consumer sentiment in January.
[/li][li]It came as no surprise that the Asia-Pacific region experienced massive declines in both short and long term sentiment indexes, with the three-year gauge plummeting to the lowest level since records began in November 2011. Given the weight the Chinese economy has on the global economic arena, future development in the world’s second biggest economy will continue to determine central banks’ monetary policy decisions, and effect market participants’ risk appetite, business and consumer confidence.
[/li][li]Europe, in contrast, was a bright spot in Dukascopy Bank January report, as both readings climbed in the measured month.
[/li][li]North America saw mixed results in January, as the six-month sentiment index inched down slightly, while the three-year measure rebounded.
[/li][/ul]

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Highlights of the latest Market Research on GBP:

The Pound’s fate was determined by the events surrounding the Bank of England on Thursday of the previous week. By turning increasingly dovish on interest rates, the BOE sent the national currency deeper into red and on Thursday-Friday it was the second-worst performing component across the board, just behind the US Dollar. Concerns over the Fed rate increases, namely the possibility of no hikes throughout 2016, pushed the Greenback down by 2.17% over the whole period, the most negative result among G9 currencies. Australian Dollar got the second place from the end, by losing 1.73% in five days through Tuesday.

Markets were increasingly turbulent over the whole five-day period, and there were separate reasons for literally every single day. The period’s first part was especially busy with many statistical data releases from G8 countries. Economists were waiting for US employment and wage numbers to conclude the previous calendar week, in order to access the level of pressure on the country’s labour market from global instability that has been in place since the first weeks of 2016. However, volatile time slots were equally being changed by a more tranquil development. Therefore, elevated volatility indicator has only reached 36% for the Sterling and 35% for the whole market.

Significance of the British currency for the previous trading week has broadly come in line with longer-term average readings. Average correlations held at 0.42 points, the same as a 20-day mean and slightly above 0.37 points posted by half-year and annual time frames. Traditionally, some correlations were weaker than others from time to time. However, they were helped by a number of components with absolutely green correlations. A good example is the interconnection between GBP/EUR and GBP/JPY (0.82 points), which truly mirrored everything that took place on the markets in the past 30 calendar days.

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Highlights of the latest Market Research on EUR:

For the majority of the observed indexes, the movement directions for the entire period was set on its very first day. As the market was heavily influenced by the falling oil prices, the commodity currencies’ gauges mostly followed a downtrend pattern, while the yen continued its rapid appreciation that started in the first days of February, after the currency was hit by the surprising BoJ interest rate decision. As a result, the yen added 4% in value during the period and gained 2% over its nearest counterpart – the franc, another safe-haven currency. Meanwhile, the Euro took the third gainer’s position with a 0.7% appreciation of its index. The rest of the observed currencies finished the period below the baseline.

The periods of elevated volatility broadened compared to the previous readings, mostly due to a more even distribution of activity across trading days. The market and the Euro both added 10% to their overturbulence portions, while most of the hustle came from the yen, which was climbing up throughout the week, but suffered some ups and downs in Tuesday and Wednesday Asian sessions, putting its measure at 54.1%. The JPY Volatility Index was also the one to reach the period’s second highest peak, jumping to 3.2 as the yen zigzagged with the wave of demand for the safe-haven currencies on Thursday. The period’s high, in turn, was posted by the krona’s gauge, which spiked to 4.8 with the Riksbank’s decision to put rates deeper into the negative territory.

The past week was marked by the weakening of the single currency’s significance. The average value of the EUR significance measure has lost 0.07 points comparing with previous three periods. The EUR/USD components also showed the weakening of bonds and lost from 0.02 to 0.16 points. The only EUR/USD components to not lose any points were the ones with EUR/JPY and EUR/CAD. Comparing with the long-term values, the average values of the composite and almost all EUR/USD components also suffered a 0.03-0.18 points decline.

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Highlights of the latest Market Research on USD:

For the second week in a row the yen confidently maintained the leading position, ending the period well ahead of its peers. The yen’s strengthening started at the very beginning of February as a recovery from a plunge following the BoJ unexpected interest rate cut. This time the JPY Index was further supported by an upsurge of interest towards safe-haven currency, and posted a solid 2.6% increase. The franc and the Euro followed their safe-haven peer, but at a much more moderate pace and finished the period notably closer to the baseline. For other observed currencies the period was not successful, and they ended the week at the negative area.

After two relatively tranquil weeks, when the volatility indexes peeked above the reference line on only three out of five trading days, activity on the market picked up. Though occurring mostly in late afternoon and thus still deviating from the usual pattern of increased turbulence all throughout the European and North American sessions, higher-than-historical volatility values made up around 50% of observations for the major currencies, peaking at 63% for the yen. The most tranquil currencies were the Loonie and the Kiwi, both posting the readings of 37%, which were still more than 15% higher than previous. Maxima-wise, the most notable result was shown by the Swedish krona, whose turbulence measure jumped to 4.9 with the Riksbank’s decision to put rates deeper into the negative territory.

The average of the dollar’s correlation composite was unchanged from the previous week’s somewhat recovered readings, but the bonds between the pairs containing the safe-haven and the commodity currencies turned back to posting strongly negative values. Correlation between USD/EUR and USD/CHF, on the other hand, notably strengthened, adding 0.09 points to the average and pushing the distribution tightly to the upper limit. All in all, after spiking on Friday, February 5, the dollar’s composite spent the first part of the week among its averagely performing counterparts, but, as the pull of the turmoil between the safe-haven and the commodity currencies bought it back below the significance level, it returned to being the weakest of the observed gauges.

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Highlights of the latest Market Research on JPY:

Last time when we discussed the Japanese currency, it used to be the worst performer across the board amid a decision of the Bank of Japan to introduce a negative interest rate. However, the Yen’s bearish reaction was very short-lived and it resumed rallying in a few days post-decision. This is all about the safe haven status of this currency, which is attractive in times of increased instability in global equity and commodity markets. The vast part of indexes, even including the Euro and Swiss Franc, traded in the negative zone during last period ended February 16, while the researched currency earned the first place.

Japanese events were not those that dominated in the economic calendar during the researched time period. However, volatility of the Yen was still higher than two weeks ago when the Bank of Japan made its rate decision. JPY remained volatile for 44% of all time in the past five trading days, while the market’s elevated volatility touched only the 35% mark. The only cross to trade in a turbulent manner more than 50% of all time was SEK/JPY. On Thursday the central bank of Sweden, Riksbank, curbed the Repo rate to –0.50% from the previous level of –0.35%, thus creating a great deal of turbulence for the whole market.

Although weakening by the end of the period, significance of the Yen was high overall, helped by especially confident gains on Wednesday-Friday. Looking at violins, only the JPY/EUR’s component with the JPY/USD pair, the most liquid one, was shortly moving into the red territory, even though general picture still looked quite positive. The mean correlation coefficient skyrocketed to 0.73 points, therefore surpassing all previous periodical averages. At the moment the 20-day mean is 0.65 points and it drops to only 0.42 on a yearly basis.

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Highlights of the latest Market Research on EUR:

The EUR Index lost the momentum it accumulated during the last days of the previous period, making its movement less directed and thus less successful. Among more determined indexes, the Lonnie’s and Aussie’s measure retained the uptrend it took up on February 12 and strengthened due to rising oil prices on the back of the Doha commitment, being commodity currencies. However, Australia’s labor market took a turn for the worse in January as a large number of full-time jobs were lost and the unemployment rate rose to its highest level n five months.

During the period, the market volatility was below the average historical level. While the Euro volatility index’s values were very close to those of the market, the pound became the most turbulent currency. Its index spent 29% of time in the area of elevated volatility and reached the 1.42 mark on Tuesday evening, following the release of disappointing CPI data from the UK and continued market uncertainty. Despite accelerating at its fastest pace since January 2015, the poor form of UK inflation continued as the latest UK CPI showed minimal 0.3% growth year-on-year, far below the 2% inflation target set by the Bank of England.

The Euro’s significance measure held at its usual level throughout the past period. Thus compared with the short-term values, averages of the aggregate and its components changed for 0.01-0.47 points. Most of the components started the period at a rather high level, but declined in the middle of the week. The drop was most notable in the components containing EUR/JPY, especially in correlations with EUR/CHF and EUR/SEK, which fell into the negative area on Thursday. Most correlation distributions, in turn, shortened their lower tails and concentrated around the averages.

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Highlights of the latest Market Research on USD:

The past week was full of ups and downs, with the observed indexes switching positions throughout the whole period. The yen’s gauge posted the greatest weekly growth for the third time in a row, though its ascent was notably less firm, and it spent the first day and a half below the baseline, hit by the preliminary Japanese GDP showing a greater-than-expected decline in Q4. The yen’s main competitors were the Loonie’s and Aussie’s measures, both of which surged with the oil prices on Wednesday and finished the week with a 0.8% gain. The period’s biggest loss, in turn, was posted by the pound’s index. The measure finished the week with an uptick, supported by the news of an agreement reached by the UK Prime Minister and the EU leaders at the summit in Brussels, and outpacing its closest peers—the Euro’s and the franc’s gauges. However, all gains were erased as the new week opened after London Mayor expressed his support for “Brexit”, and the GBP Index lost 1.1 points from the Friday’s value.

The past trading week was relatively calm for the Greenback and its counterparts. The pound became the most turbulent currency in terms of elevated volatility portion as it notably reacted to domestic news such as CPI and unemployment releases. However, the portion reached only 20%, while the market volatility exceeded its historical level only in 7% of time. The safe-haven yen, in turn, turned out to be the most tranquil against the background of turbulent first half of February and the USD/JPY volatility index posted 3% of overturbulence instead of 63% previous week.

For the third week in a row the Greenback’s significance measure held roughly at the same level. Comparing with the previous period average of the composite lost only 0.03 points. Growth of the commodity currencies’ rates was reflected in rise of average values of correlations with USD/AUD and USD/CAD. In contrast, the bond between USD/EUR and USD/GBP weakened and the component lost 0.13 points.

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Highlights of the latest Market Research on GBP:

The past period was rather dynamic for the observed currencies, and the indexes posted a wide range of weekly changes. The highest mark was hit by the yen’s gauge, which continued to undermine the BoJ hopes for an upturn in inflation and gained over 2% over the past five trading days, bringing its monthly growth above the 4% mark. Rivalling the Asian index were its commodity peers, guided by the oil prices and the recently sharpened divergence between the risky and safe-haven assets. Meanwhile, the Euro’s and the franc’s gauges were dominating on the other side of the baseline and posted the second and the third worst results, respectively. The latter, however, managed to gain back around 1% of its base value after the SNB head’s speech fuelled the demand for the currency on Tuesday, ending up with a modest weekly loss of 0.5%.

The past week was extremely tranquil for almost all observed currencies. Thus elevated volatility portion of the market and currencies remained in 2%-14% range. The only exception was the British pound, which 30% of the observed period spent above the average historical turbulence level. However the peaks of the pound’s volatility were not high. The Aussie and the Swedish krona, in turn, showed the most conspicuous spikes. The Australian employment data and the Swedish CPI reports pushed the indexes up, and they even exceeded the 2-points level.

The pound’s significance measure was holding among the leaders during the observed period. As concerns about the possibility of “Brexit” came to the forefront with the Brussels summit, the bond between the pound’s crosses notably strengthened and the correlation distributions shifted towards strong positive values. However, the pound was not an indisputable leader as the commodity currencies and the yen remained among the main market drivers, and the oil market movements continued to be one of the major economic issues.

[DRT]

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Highlights of the latest Market Research on EUR:

The first day of the period was calm for all observed currencies. The most conspicuous was the Sterling drop – which*reached its lowest level in seven years as investors anticipate the possibility of Britons voting “Out” in the upcoming ‘Brexit’ referendum. Thus, the currency remained on the worst performer’s position till the end of the week, and probably, will continue its downward trend. Together with the majority of the currency indexes, it ended the period with 3.0% deviation from the baseline. Commodity currencies such as Loonie, Aussie and Kiwi, in turn, finished the period with more than 1.3% gain and became the top performers.

The turbulence on the market edged up from 1% of elevated volatility in the period ending on February 24, mostly fueled by negotiations over crude oil and increased concerns over a possible Britain’s exit from the Euro zone. The Euro was the sixth most turbulent currency by all parameters, with its portion of elevated volatility and average volatility index level beat by the pound’s and the yen’s readings, and the maximum turbulence surpassed by the franc and the dollar. Subsequently, EUR/CHF was the most volatile single currency’s cross. Meanwhile, Friday, Tuesday, and Wednesday were the only days with some noteworthy volatility spikes and all of them were about the Euro’s turbulence.

The Euro significance measure was quite dynamic during the period, ranging from 0.17 to 0.46, but ultimately posted slight change from its initial value. The composite’s average value remained unchanged from the previous period, though the averages of most of its EUR/USD components posted a moderate growth. This growth was more substantial than the weekly change, as the component distributions notably shifted up, making their upper tails heavier and lower tails shorter.