The past week was marked by the rapid growth of the Canadian dollar, which started on Wednesday against the background of the rising oil prices. As a result, the CAD Index ended the period with an almost 3% gain and became the indisputable leader of the week. The pound, in turn, was the main outsider of the observed period. Its weakening began after the announcement of the date for the “Brexit” referendum last week, and the pound’s measure lost 2.58%. The second worst performer of the week was the Euro, whose index dropped below the baseline with the disappointing PMI data in the very beginning of the period and consequently spent its second week in a row in the negative area.
In terms of volatility, the past week turned out to be very similar to the previous one. There were very few economic releases which notably influenced the market activity, but during the rest of the period the currencies were largely driven by the oil price movements and the “Brexit” fears. As a result, the British pound became the absolute leader in terms of elevated volatility portion with a 33% reading. The Greenback, in turn, was the calmest among its counterparts.
The dollar’s correlation composite slid a little further below the significance threshold in the last week of February, failing to return to the strengthened levels it reached in the beginning of the month. Most of the USD/EUR components held close to zero, with only USD/CHF gauge posting a solid average 0.80. Meanwhile, correlations between the pairs containing the safe-have and commodity currencies became more negative compared to the previous week, notably weighting the composite down on Friday despite the dollar’s strong move up. Among other observed composites, the Euro’s gauge held on the same levels as the dollar’s, while dominating their peers were the Asia-Pacific measures.
Canadian Dollar represented the example of a very reliable price growth in course of the past period, even though the country’s fundamental calendar brought us nothing but the Tuesday’s GDP report. Here we have got a classical influence of commodity prices on currencies that depend on oil and other energy developments. Both CAD and NZD were booking the largest increases on Wednesday-Friday of the previous week. In the meantime, the busy economic week for Britain failed to move the Pound, which seems to be entering the wait-and-see mode before the upcoming referendum on the UK’s membership in the EU on June 23.
The Pound was definitely much more volatile in course of the observed time period than the market as a whole. A particularly turbulent cross was the most popular one—the Cable. GBP/USD was active in 37% of all time of the period, according to the elevated volatility indicator’s data. Some important economic events caused movement of the Greenback, including a decent durable goods report on Thursday and the second-estimate Q4 GDP release a day later. US economy posted a 1% economic expansion amid a buildup in inventories. Investors, however, had anticipated a slowdown to only a 0.4% increase.
Significance of the researched currency was a subject to decline on a day-to-day basis over the period we are looking at—from Wednesday of the previous week until this Tuesday. Nonetheless, mean correlations of all crosses of the Pound have received a reading of 0.50 points, which is more than 0.48 points for the 20-day period before the observed week and 0.38 points on the annual basis. Traditionally, low correlations were booked by those components that include commodity-dependent currencies on the one side and safe-havens, such as the Euro, on the other.
[B]Dukascopy Community TV Webinars as of 4 March, 2016[/B]
Dear traders,
As always, we would like to welcome you to tune in to our daily webinars that are held on Telefision, Dukascopy broadcasting platform, where Dukascopy Community members share their trading strategies/ideas and discuss live trades on air starting from 7:00 GMT up until 18:00 GMT.
Today’s agenda:
08:30 - Catching Every Pip
11:00 - Market Analysis Live in 3 Different Time Frames
12:00 - [B]DUKASCOPY RESEARCH WEBINAR[/B]
12:30 - Current Week in Focus
13:00 - Algo war, tech talk and everything you wanted to know about the market but were afraid to ask
13:30 - [B]USA - NON-FARM EMPLOYMENT CHANGE[/B]
14:00 - Currencies of Interest
15:00 - 1 pip box renko price action scalping + 70 tick EURUSD + 4hr Majors and crosses overview
15:30 - Reviewing the impact of news and events on the FX market
16:00 - Daily Technical Levels
Make sure you tune in and stay with us, as we are going to discuss the USA Non-farm Employment Change numbers, which will be out at 13:30 PM GMT! Moreover, today is THE DAY FRIDAY(!), therefore, take a look at the topics we are going to cover at out today’s Research Webinar at 12:00 GMT:
Fun Friday Quiz on Top News and Headlines
Expert Commentary From ING Belgium SA/N on Euro zone
The EUR Index continued to go south during the fourth day of spring, finishing on the position of first worst after a particularly sharp fall on Wednesday. The another index post looses was the Swedish krona measure, which held on a steady downtrend Tuesday and took its conclusive slump on Wednesday. On the other side of the baseline, the Australian dollar remained the leader after the he Australian economy grew 0.6% last quarter, beating the market forecast of a 0.4% expansion. The Sterling and the Loonie came in the second and the third, mainly supported by macro data as well as oil prices.
The past five trading days, much like the several previous periods, were quite volatile for the observed currencies. The most volatile were CHF and NZD composites, with 40% and 20% portion of elevated volatility. The first strongly reacted to better-than-expected Swiss Q4 GDP, pushing the market volatility to exceed the average historical level on Wednesday. The kiwi index, in turn, also reached the great volatility peak among its counterparts. The currency secured the position of the best performing currency out of the G10 basket during Friday’s overnight session, finding support primarily from a commodities surge and softer dollar.
Even though the Euro significance measure was decreasing during the period, its average correlation readings stayed almost at the same level. The value of the composite itself edged 0.09 points up, while its most resultant components – EUR/USD correlations with EUR/JPY and EUR/CHF, – gained 0.25 and 0.32 points on their averages. The bond between EUR/USD and EUR/SEK was the only one to weaken, with its mean value losing 0.03 points. It did, however, grow compared to the long-term readings, as did all other correlation components.
The past period was notable for a clear separation of the observed indexes into leaders and losers, and their persistence in the chosen direction. Thus, the Pacific gauges strengthened their positions above the baseline, both entering a rally on Wednesday. The Aussie’s measure got an additional push from better-than-expected GDP released earlier the same day, and with that held about one point above its Kiwi counterpart, posting the period’s greatest gain. The second best result was shown by the NZD Index, while the closing gauge among the top three performers was the pound’s measure, which spent the week climbing out of the pit it fell into with the “Brexit” concerns and managed to win back around 1% of the 2.6% it lost in the past period.
Volatility on the market picked up compared to the previous two tranquil periods, though it remained borderline subdued, with maximal overturbulence portion of 23% and average index values around 0.8 points. Nevertheless, there were three currencies that drove their volatility measures above the 2 points line. The franc’s index was the first and reached the 2.22 mark in Monday afternoon. On Wednesday, the Aussie positively reacted to the higher-than-expected domestic GDP and its volatility measure skyrocketed to the week’s high of 2.84 points. The week ended with one more notable spike of 2.39 points experienced by the dollar’s gauge, which followed widening trade deficit and pessimistic wage data releases.
The Greenback’s significance measure rose slightly in the past week, ending the period with a 0.13 points gain. However, the average value of the composite did not exceed the feeble monthly and weekly values. Moreover, averages of USD/EUR components containing European currencies lost 0.01- 0.18 points from their previous values. Other USD/EUR components, in turn, showed positive dynamics and shifted up, exceeding their short-term average values.
In the first report on the Australian Dollar in three months, this currency is showing the best weekly performance among all G9 currencies. The lead of the period was established immediately after it had started on Wednesday, March 2. At some point of the rally was reaching three percent and the gains were completely maintained until Tuesday of this week when the Aussie Index closed with a 2.59% increase against the others. On the positive side, the Pound Sterling rebounded 0.65% amid fading concerns over the so-called Brexit, or Britain leaving the European Union after the referendum that is due to be held on June 23.
In case we do not include those spikes of the AUD volatility that took place on Wednesday and Friday of the last week, this currency may seem to be completely calm and tranquil. Events other than Australian foreign trade statistics or US labour market data failed to provide the Australian Dollar with any active momentum, but it did not prevent this component from becoming the best performer of the period. Low volatility is clearly reflected in the elevated volatility readings for both the Aussie and the market—both did not exceed 13%. Nonetheless, some currency pairs including AUD/USD (23%) and GBP/AUD (27%) performed somewhat better than the others.
Without quite strong correlations between various currency pairs of the Australian Dollar the substantial growth of this currency against its main counterparts, most likely, would not be possible. The mean correlation coefficient was 0.60 points last period, which is two basis points higher than the monthly and half-year averages. It is therefore exceeding the annual mean by five basis points. The AUD/EUR & AUD/GBP separate component booked much higher correlation than it had normally done before. This is due to a strong link between the Euro and the Pound in the run up to the UK-EU referendum.
Index activity picked up in the past trading days, and most notably so for the Euro’s gauge that climbed to almost 200 points and finally posted the greatest weekly gain after previous sluggish months. Following the general pattern of the EUR Index during the week, the euro eventually became the best gainer among its counterparts. Similarly to the Euro’s measure, the SEK Index had its sharpest surge on Thursday afternoon, jumping from below the baseline to 1.40 points in three hours. Meanwhile, most of the other gauges dipped, with the NZD and the USD Indexes acting as the downslide leaders.
The past five trading days, much like the several previous periods, were tranquil for the observed currencies. The most volatile were USD and JPY composites, both with 37% portion of elevated volatility. The latter strongly reacted to the ECB President decision to cut the deposit rate further into negative territory,*from -0.3% to -0.4%, while the main refinancing rate was surprisingly cut as well from 0.05% to 0.00% and the marginal lending facility was lowered by 5 basis points to 0.25%. The Pound’s index, in turn, reached the lowest volatility peak among its counterparts. ll. It is worth noting that Thursday’s ECB Monetary policy statement induced
The Euro significance measure had a few ups-and-downs and ranged from 0.2 to 0.88 during the past week. Nevertheless, its final change from the initial value amounted to only 0.13 points. The average values also remained almost unchanged from the past week, with 0.01-0.05 points strengthening of the composite and most of its EUR/USD components. The three components lifted their mean levels. Thus, EUR/USD mean correlations with EUR/GBP, EUR/CAD and EUR/JPY gained 0.50-0.58 points.
Unsurprisingly, the past period was most notable for the sharp movements of the major currencies, as three rate announcements from central banks caused some spikes and plunges on Wednesday and Thursday. The first to speak was the BoC, which expectedly left the rate unchanged in favour of waiting for the budget release. That, together with an uptick in the oil prices, helped the Loonie’s index climb out of the negative area and rise above most of its peers. Meanwhile, the RBNZ did surprise the market, as the official interest rate was cut and the regulator’s governor said further easing was not off the table. The Kiwi’s gauge lost 2% and fell below the 98 points line. Nevertheless, the ECB was the only bank that managed to evoke a palpable reaction from almost all observed indexes. As the bank announced a cut of all three benchmark rates, an expansion of QE and new TLTROs, the EUR and the CHF Indexes fell to 99 points, while most of their non-European peers enjoyed an uptick. Later, though, the press conference and Mario Draghi’s comments about there being no need for further rate cuts saw the Euro’s index skyrocket to 101.5 and its counterparts to plummet.
Volatility on the market remained largely subdued, as the overturbulence measure barely rose above one third, even with the big moves on Wednesday and Thursday. The week’s most active currency was the franc, which posted 46% of elevated volatility, with the krona’s 38% reading as the second highest. Meanwhile, the highest peaks were reached by the Kiwi’s and the Euro’s turbulence gauges spiking to 7.7 and 5.0 points at the respective interest rate announcements. The dollar’s and the franc’s readings of over 4.0 points were the next highest, both prompted by the market’s reaction to the ECB news.
During the past week the observed currencies produces no concrete leader in terms of significance, though there were several events which made the associated currencies become the market driving force at different points in time. However, the Greenback’s composite remained one of the weakest among the observed gauges, as the week was sparing of US economic news, and correlations between the dollar’s European and commodity pairs remained weak.
Activity of the foreign exchange market was dampened throughout the period, but we make an exception for Wednesday and Thursday. Canadian Dollar traded on a positive side during all days of the week, and even the unexpected European Central Bank’s decision to cut all facility rates and expand monetary support was unable to completely derail the observed currency. Margin of safety was accumulated on Wednesday when the Bank of Canada’s interest rate decision provided CAD with upward momentum. The period was finished with a gain of 30 basis points, just slightly behind its Australian counterpart that added 0.33%.
According to the tracking indicator for elevated volatility, the Canadian Dollar stayed turbulent in about a third of all time in the last five days. At the same time, market volatility was 36%. Without any surprises, the most active currency pair had to be NZD/CAD (44% of all time), given presence of many central bank and other fundamental events during the length of the whole period. Second in a row, the CAD/SEK cross was volatile in 37% of all moments over the period amid the previously mentioned Swedish inflation numbers that moved the Krona. Particularly the first three days of the week were quite choppy, owing to Canadian statistical data releases and the ECB meeting.
While volatility of the currency has a greater exposure to international events, correlations of different crosses of the same currency are influenced mostly by fundamentals released inside the respective region or country. Significance of the Canadian Dollar was high last week due to the BOC monetary policy event and employment data for the country. The mean correlation coefficient picked up to 0.52 points over the past five working days and exceeded the monthly average of 0.50 points. Moreover, six-month (0.48) and annual (0.44) readings were left even more behind.
[ul]
[li]Having started the year on a disappointing note, seeing the weakest month-on-month growth for thirteen months in January, the global economy continued showing relatively weak performance over the last month. Concerns thrive over Chinese economic expansion prospects even with implementation of a new growth target range, while the possibility of ‘Brexit’ puts a shadow of doubt on the outlook for growth in Europe. Meanwhile, the effectiveness of negative interest rate regime, that is being introduced in many economies at the moment, has become questionable. However, despite these developments, business and consumer sentiment in February managed to climb modestly.
[/li][li]The persistent turmoil in financial markets and a steep drop in February’s Euro area’s PMI did not manage to sharpen prospects for downside risks in the near term, with the six-month outlook jumping 0.05 points, while the three-year sentiment climbed 0.07 points 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 0.06 points.
[/li][li]The negative sentiment for the Asia-Pacific region observed throughout 2015 does not seem to have carried in the Q1, as the both short and long term gauge soared in February. Against China continuing to pose downside risks to growth in the entire region, looser monetary policies in many countries managed to shore up economic activity, determining market participants’ risk appetite, business and consumer confidence.
[/li][/ul]
The past week was quite successful for the Australian Dollar. The Aussie Currency Index was ranging around the base line during almost the whole period, however, on Thursday, the currency managed to reach its 9-month high, boosted by higher oil prices, positive domestic macro data and downgraded US Federal Reserve outlook. The latest Fed’s decision to scale back its rate hike forecasts, while keeping the target range for federal funds unchanged at 0.25%-0.50%. The currency index was only outperformed by Canadian Dollar index which ended the period with the first best result of 0.98%.
The period was notably lacking turbulence, as most elevated volatility portions stood below 1.0 mark. However, some indexes managed to lift its average to at least 2 points. The Euro was amongst the volatile currencies, with only Yen, Krona and Frank surpassing it in stability. Meanwhile, the Canadian dollar and the feeblish pound were the least tranquil, their over turbulence percentage at 20 and average volatility at 0.79. Additionally, the Greenback and the New Zealand Dollar reached the highest volatility peaks, both a little over 3.00 points. The dollar’s index spiked on Wednesday as traders digested a set of new macro updates from the US, namely upbeat core CPI.
The single currency’s significance measure was showing a strong downward trend during the past week. However, the movement was smooth, but the composite still had a few ups-and-downs and ranged from 0.15 to 0.80 points. Nonetheless, averages of the composite and its EUR/USD components were almost in row with the previous week’s values. The most notable changes occurred in EUR/USD correlations with EUR/CHF (-0.13 points).
During previous days, the observed currencies managed to go through some notable ups and downs. However, the yen, which started the week with the most impetuous appreciation against the background of weakening oil prices and neutral BoJ’s message on the rates, held its position till the end of the observed period and became the leader with the 1.32% growth of the index. The dollar, in turn, was among the worst performers and, furthermore, found itself outpaced by the former loser GBP Index on Thursday, when the BoE’s decision to leave the interest rate and asset-purchasing program untouched helped the domestic currency to improve its positions after Tuesday’s drop on another wave of “Brexit” concerns.
Aside from a few separate major moves, the past week was very tranquil, and the portion of overturbulence on the market reached only 17%. The Greenback was also relatively calm, with its portion of elevated volatility only marginally higher than the market’s, but was noteworthy for posting the week’s highest volatility spike. Among other currencies, the Kiwi was the only one to push its index above the 3-points mark. In terms of elevated volatility, the krona was the most turbulent currency and, against the background of the Swedish CPI and unemployment rate reports, has spent 26% of the period above the historical level.
After shooting up with the post-ECB turmoil on March 10, the dollar’s correlation composite spent most of the past week above the significance threshold. The gauge also managed to pull its 5-day average just below a solid level of 0.5 and thus above all long-term readings. Among the USD/EUR components, the most notable changes took place in the bond with commodity currencies’ pairs, as the gauges cut their negative tails and put their averages from near-zero levels to 0.4-0.5 points.
Somewhat mixed performance was recorded by the British currency last period, which started on March 16 and ended on Tuesday of this week. News from the Bank of England on Thursday managed to push the currency above the baseline, while unexpected attacks in Brussels made the British currency the worst performer on Tuesday. Markets are worried that instability in mainland Europe is going to boost the “Leave” campaign’s support to get the UK out of the EU after the referendum on June 23. At its weekly peak on Friday, GBP was posting the third best return, just behind the Kiwi and Canadian Dollar.
We have decided to mark three distinct time slots with volatility much above historically normal levels. In two of three cases the turbulence was fuelled by mainly domestic issues, while on Wednesday the Federal Reserve used to be the determiner of all market changes. Owing to Tuesday’s Brussels events, the elevated volatility of the Pound rose to 22%, compared to only 17% for the whole market. It proclaims that the GBP Volatility Index stood above the 1.00 threshold for a bit more than one fifth of all time during the March 16-22 period. On the back of the Fed’s monetary policy decisions and Dollar’s plunge, the GBP/USD cross was the most volatile and posted the elevated volatility figure of 35%.
Significance of the Pound, calculated as an average correlation between various crosses of this currency, was quite high during the period ended March 22. This is evidenced by the mean correlation coefficient, which, at 0.46 points, has more than enough outperformed the monthly average of 0.42 points and 130/250-day averages of 0.40 and 0.39 points, accordingly. As for the reasons that have pushed up significance of the Pound, the primary one seems to be a busy economic calendar, both locally and abroad. Major events are normally uniting different currency pairs and they start moving in a similar direction.
Despite a bunch of fundamental data from Europe, and it was a surprise that the single currency managed to change only by 0.16% compared to its counterparts. Moreover, the most traded currency pair was almost unchanged over the observed period. With almost 63% of opened position being short on EUR/USD and with the single currency being sold in 37% of the time, it was not a surprise that the Euro index remained around the base value in the first half of the week and moved lower closer to Friday. However, the US Dollar index lost around 1.56% even despite lack of economic announcements.
Financial markets remained rather calm during the last week, with an average volatility being mostly below the historic values, while elevated market volatility was registered only in 23% of the time. Thus the portions of elevated volatility of the aggregate and EUR were only 3% and 2% respectively. For the most of the components the past week also was rather tranquil, and they spent above the historical level 1% - 18% of the period. The highest results were demonstrated by EUR/CHF and EUR/JPY, the components showed relatively high results, having held above the 1-point level 18% and 16% of the observed week.
For the fourth week in a row the single currency significance measure continued to decrease. Thus in a five trading days the composite has weakened by 0.1 points. However, compared with the previous week the averages of the gauge and its components mostly remained unchanged. The most notable changes were in EUR/GBP correlations with EUR/GBP and EUR/NZD—averages lost 0.22 and lost 0.09 points, respectively. Most of the correlation distributions, have concentrated at the level of averages, almost entirely having lost the upper tail.
The past week was largely tranquil for the observed currencies, as most of the indexes stagnated on the levels between -0.5% and +0.5%. A notable exception in the negative area was the pound’s gauge, which failed to derive long-term benefit from the post-Fed surge and plummeted on Tuesday, when tragic events in Brussels drove investors away from the European currency. Already weakened by the growing “Brexit” concerns, the GBP Index lost around 1.3 points by afternoon and remained close to 98.5 points mark till the end of the week.
As suggested by the currency indexes, the past week was extremely undervolatile for the market. Even against the background of the previous period’s tranquility, the observed indexes hardly managed to reach above the reference line, with the aggregate measure posting the elevated volatility portion of 4% and the krona’s gauge offering the highest reading of 17%. Two highest peaks of the indexes themselves stood just below 1.6 points and were both reached on Tuesday, when the pound tumbled and the safe-haven yen jumped.
In the absence of any major moves from the dollar its correlation composite remained close to the significance threshold of 0.3 points during the week. Its average pulled back from the previous week’s firmer reading, and the distribution shifted back towards the long-term average, cutting the positive tail short. Similar weakening was observed in the USD/EUR components, with the only the pair’s bond with USD/JPY standing out with a palpable drop below zero. The change was, however, fully attributable to Tuesday’s developments and did not spread further than Wednesday morning.
With a decline of 0.83%, the Japanese Yen became the worst-performing major currency over the period of the last five days. Risk-on sentiment across the globe was driving the whole market, despite hawkish remarks that were made twice by the St. Louis Fed President James Bullard. Yen’s specific selloff was additionally fuelled by largely depressing domestic statistics. On the other hand, one of the riskiest currencies, the Kiwi, appreciated by 1.37% over the period. Until Tuesday the New Zealand Dollar was the fifth best performer, but it turned to become the undoubted leader after a dovish tone set by the Fed Chair Janet Yellen.
Volatility of the Japanese currency had little to do with its real downside movement throughout the past five trading days. Very limited information can be extracted from the JPY Volatility Index, which is indicating this currency was turbulent is just 3% of all time during the observed period. It is even less than 4% registered for the market as a whole. Partly, this is because Easter holidays in a number of regions worldwide diminished trading volume and dragged the volatility lower as well. It is very clearly reflected in the main chart, where on Friday and Monday the red line was placed deeply below one point, which divides a turbulent market from tranquil conditions.
Significance of the researched currency, normally measured by the average correlation coefficient between individual pairs of this currency, was declining day-by-day in course of the period we are looking at. In spite of that, the overall mean correlation coefficient settled at 0.54 points, which is four basis points lower than the 20-day average. At the same time, it exceeded the six-month mean by four basis points and the annual average by as many as ten basis points. The base USD/JPY cross was relatively well correlated to the Yen’s rate with the Euro, Swedish Krona and Canadian Dollar.
The period, which put most of the observed indexes either on or above the baseline, resulted in a 0.3% gain for the EUR Index while the major gainer was New Zealand Dollar which rose 1.88%, while Australian and Canadian dollar posted the same results, 0.29%, respectively. On the other side of the baseline, the Dollar remained the major leader in its looses and posted a 1.9% weekly drop. Meanwhile, the Yen continued to be second worst performer on the long-term basis, whereas the Pound’s gauge as well as Frank’s gauge stood among the weakest four.
The week was extremely calm for the market in terms of both portion of elevated volatility (only 12%) and values of the Volatility index (with maximum of 1.45 points). It is worth noting that relative tranquility of the period was pointed out by the volatility indexes of all observed currencies. The most volatile was GBP with 20% portion of elevated volatility and 1.79 being the highest peak of the index, which was reached on Wednesday morning, right after the Fed Yellen’s dovish statement that central bank will move cautiously with further rate hikes. The Yen, in turn, was the calmest, as its index never reached the average historical level.
The past period was quite mixed for the Euro significance measure, as the composite has opened the week on 0.25 mark and finished the observed period slightly lower 0.22 level. Moreover, the strengthening was observed in almost all correlation components. Thus, EUR/USD correlations with EUR/CAD gained about 2.1 points past week. A notable raise also took place in combinations containing EUR/CHF, which gained around 1.87 points on average. The lowest performance was observed in bond between EUR/USD and EUR/CHF. The development was also observed in average values of correlations. Averages of observed components have gained in terms of both short- and long-term values.
The past week was a steady one for the observed currencies, as most of the indexes waved around moderate levels with little to no directional movements. Among notable exceptions were the NZD Index’s surges on Tuesday and Wednesday, backed by the Greenback’s weakness and strong building permits data coming from New Zealand. The jumps put the Kiwi’s gauge at +2.4%, and the measure yielded only 0.7 points by the end of the period, posting the greatest weekly growth. On the other side of the baseline, the longest downside was suffered by the pound’s index, which failed to shake off its general “Brexit”-fuelled feebleness and lost over one point after a disappointing manufacturing PMI release on Friday.
Activity on the market and among the dollar’s pairs rose slightly from the readings of the previous week, though the latest level of turbulence still remained rather low. The Greenback’s aggregate volatility index spent 21% of the time above its historical level and largely pointed to the dollar’s overturbulence compared to the market, as it held above the overall measure during the past week. Thus the Greenback became one of the most volatile currencies of the observed period, with only the pound posting a greater overturbulence portion of 29%. Moreover, the dollar’s index also reached the highest spike compared with its peers, surging to 2.42 points.
The week was associated with the strengthening of the bonds between the USD instruments. The average levels of the correlations between the USD/EUR and the non-European USD pairs were above their long-term values, while the components containing two European pairs continued to demonstrate high correlation. As a result, the composite’s average gained 0.08 to 0.17 points against the long-term readings, which pointed out exceptional significance of the Greenback that week. Meanwhile, the Kiwi became the dollar’s main competitor in terms of its market driving power, as it strongly reacted to its US counterparty’s losses and gains.
For the first two days of the period the Pound was able to hold to moderate losses along with a number of its peers. However, by clearly indicating that the sell-off was not going to stop, this currency established itself as a clear outsider of the period ended April 5. Until Thursday the last place in overall rankings of currencies was shared with the Japanese Yen and US Dollar. However, the former commenced an unprecedented comeback by the second half of the period, spiked on the back of flight to safety and thereby finished the five-day long period with a gain of 2%. Another safe haven, the Swiss Franc, was placed second with a climb of 1.16%.
Researched currency was one of the most volatile components in the market, in case we take into account the performance of G9 most traded currencies across the board. Elevated volatility is clearly confirming this fact. It indicates that the Sterling stayed turbulent in 37% of all time during the period, namely when the GBP Volatility Index was placed above the 1.00 mark. Market as a whole, on the other hand, posted a reading of only 23%. It was quite difficult to distinguish any particular component that was fuelling this action, because literally all currency pairs of the Pound were bold and aggressive in terms of changes.
Although significance of the Sterling was in decline over Wednesday and first part of Thursday of the previous week, correlations of all crosses managed to recover substantially throughout the second part of the five-day researched period. The mean coefficient for all correlations was 0.45 points and equaled to the 20-day average reading. We saw quite a lot of divergence between different components that altogether create the composite blue line on the main chart. Some of them posted completely negative correlations, and this is reflected in the massively long distribution tails.
The EUR Index continued to go narrow during the first days of spring, finishing on the position of last best performer. The index to fare better was the Japanese Yen measure, which held on a steady uptrend since Monday and took its conclusive advance on Thursday, hitting a fresh 17-month high. The Yen was positively affected by Japanese Prime Minister Shinzo Abe announcement, that countries should avoid weakening their currencies with arbitrary intervention as well as by dovish Fed’s statements. On the other side of the baseline, the Pound remained the leader as Brexit concerns overshadow the return of risk sentiment after oil prices bounced back from one-month lows.
The past five trading days, compared to the several previous periods, were volatile for the observed currencies. The most volatile were JPY and GBP composites, both with almost 50% portion of elevated volatility. The yen extended its winning streak and rose to the highest level since October 31 2014 highs due to increased risk sentiment as well as impressive domestic wage data. The sterling strongly reacted to the advanced oil prices which bounced higher, after touching one-month lows, on the back of a 4.6 million barrel draw in the latest API data, showing the biggest draw since the beginning of the year. Eventually, market gained 2.15 points spike of the overall index.
The Euro significance measure had a few ups-and-downs and ranged from 0.09 to 0.55 during the observed period. Moreover, its final change from the initial value amounted to 0.30 points, showing a pure positive tendency. The average values in turn remained almost unchanged from the past week. Some of the components lifted their mean levels. In terms of long-term values, current averages of almost all observed correlations shifted up, pulling the overall Euro significance with them.
