The past five trading days proved to be remarkable, as the dollar’s and the Euro’s indexes switched their positions on the opposite sides of the baseline. While the single currency’s gauge turned to recovery and posted the second-greatest weekly growth, the USD Index erased all its previous week’s gains and ended the period with a 2% loss. The Greenback declined against all its observed peers, yielding over 2% to the Aussie, the franc, and the Euro, and over 3% to the Kiwi. The pound’s, the krona’s, and the yen’s indexes also ended the week below their initial value, while the Loonie’s gauge spent the period practically glued to the baseline.
The observed period could be clearly divided into two sub-periods of different volatility levels: Monday to Tuesday, and Wednesday to Friday. The first two days were tranquil for both the market and the Greenback. Portion of elevated volatility for the latter was only 15%.
The observed period was quite calm for the dollar’s significance measure. Excepting the single surge of the measure on Wednesday, the composite was slowly declining during the week. Thus the measure has fluctuated in the range from 0.26 to 0.82 points. Average values of correlations between the Greenback’s pairs stayed on the same level for the second week in a row. However, the lower tails of the component distributions became heavier and shifted down.
michaellobry, apologies for a late reply and thank you for your question!
I will start by saying that Market Research by itself does not give any explicit advice on the trades. Rather, it gives you the context of the market and explains how the market reacted to the most recent events.
To demonstrate, let’s look at the ‘Currency Indexes’ chart from the latest issue. First, we see that the Japanese Yen is currently strongly correlated with the value of the US Dollar purple and green lines tend to move together). However, previously it was the British Pound was the one to follow the Buck’s lead. Accordingly, if you are fundamentally bullish the US Dollar, it might be more rewarding to go short GBP/USD or EUR/USD instead of going long USD/JPY, being that any move by the Dollar will be accompanied by a move of the Yen in the same direction, decreasing the potential rally of the pair, should it occur. However, we must note that this also means that trading EUR/USD or GBP/USD is more risky than trading USD/JPY.
In other words, this correlation decreases the volatility of USD/JPY, this is also evident from the ‘Volatility’ section of the issue, where USD/JPY scores the lowest in the average volatility and in the percentage of time above its normal volatility.
The last section describes the significance of the currency. Particularly, what events during the last five days increased/decreased significance of the currency. It may give you an idea what events had and are going to have the strongest effect on the currency and what events were ignored and are likely to go unnoticed. For example, on Wednesday we saw that the UK labour data drew some of the focus away from the Dollar in the first half of the day, while as a result of the FOMC statement, all USD exchange rates moved in nearly perfect unison. Right now this effect is weakening.
This section also helps to understand the level of instability in the relationship between the currency pairs, namely, which currency pair can be used as a hedge or as a leverage. Right now the most reliable correlation appears to be between USDSEK and USDEUR, while there are fewer similarities between USDEUR and USDJPY. Even more importantly, there is a high volatility in the relationship between the latter two rates, and at different intervals they show different sensitivity to various events.
All in all, the primary purpose of Market Research is to give some facts about the forex, rather than an opinion, as is the case with Technical Analysis. It’s completely up to you how to interpret and apply these facts. However, you always have an option either to read our own interpretation of the statistics, or you can ask a question in person during one of our webinars, as we discuss each and every issue of Market Research. If you want to join, please click here.
During past five trading days, the British Pound was a clear under-performer on the market. This currency lost just slightly less than 1.97% from Wednesday of the previous week till Tuesday of this week, only growing against the US Dollar by 0.61%, which itself lost 2.66% across the board. The Sterling has also traded below the baseline for the most part of all time during the period, only making a small exception on Thursday. The Swiss Franc and New Zealand Dollar, in turn, were the major gainers last week, which resulted in a jump of their crosses with the Pound which amounted to 4.04% and 3.65%, respectively.
After three weeks of low volatility for many different currencies including the Pound, this indicator surged considerably last week for the Sterling. The portions of the elevated volatility for both the market and the Pound stayed at 59% and 62%, respectively. Meanwhile, the average volatility hovered well above the mean level at 1.28 points last week. The most turbulent currency pair with the British Pound used to be the most traded one, namely GBP/USD. It spent around 72% of all time above the average historical level. Moreover, GBP/JPY pair followed shortly, by being increasingly volatile throughout 68% of all time during the period.
The period was rich with influential economic releases on all the major currencies, so there were several periods of high and low correlation between GBP pairs. As a result, the distributions of the components had heavy tails. The composite itself, which measures the significance of the Pound on the market, stayed at 0.44 level on average, or somewhat higher than historical average levels. GBP/USD and GBP/EUR demonstrated unusually low correlation, pointing out weakness of the Greenback due to the Federal Reserve’s soft monetary policy statement. The same situation, in turn, was registered between GBP/USD and GBP/SEK currency pairs.
The period could be characterised as calm for majority of the observed currencies. That means that there were very few economic releases to notably influence the currency rates. The Greenback and the franc were the most interesting in terms of the currency indexes’ dynamics. The former continued its depreciation, with occasional jumps not strong enough to return its value at least to Friday’s level. Thus, the USD Index lost 1.7% of its base value during the period, showing the worst result among the observed currencies. The latter, on the contrary, was appreciating and finished the second week in a row on the best performer’s position.
After two turbulent weeks, both the market and the single currency spent quite a calm period. The highest peaks of the aggregate and the Euro’s volatility indexes did not even reach 2 points, stopping at 1.65 and 1.76 points, respectively. In addition, the market and EUR indexes held above the historical level in about 30% of the observed period, thus losing 11-29% from their previous readings.
After the upsurge of the previous week, the Euro’s significance measure lost some of its strength during the past period, edging closer to the feeble long-term values. Big part of the drop came from the EUR/CHF components, which posted the averages of 0.20-0.40 points and were the weakest ones among the Euro’s correlations. The pairs combinations with its Pacific peers were also the only ones to dip into the negative area on a couple of occasions. Meanwhile, combinations of EUR/USD, EUR/JPY, and EUR/CAD showed the strongest bonds, holding above the threshold of 0.30 points throughout the whole period and averaging to 0.70-0.85 points.
The USD Index remained in the depreciation area for the second week in a row, seemingly unable to shake off the weight of the March 18 Fed’s statement. The measure spent most of the period 1-1.5% below the baseline, but ultimately managed to gain some positive momentum and erase most of its weekly loses. The only index to hold below that of the dollar was the pound’s gauge, which tumbled to 98.5 points during the first two days of the week and only managed to fight back 1 point by the end of the period. Meanwhile, the CHF Index became the best performer, helped greatly by the franc’s surge against its major peers on Tuesday.
In spite of the fact that the week was rich with economic events, it was rather calm in terms of volatility. Monday and Tuesday were the most turbulent days, and during Monday market volatility was above the average historical level for 47% of time. All in all, there were only several moments during the week when the market volatility spikes were not associated with the Greenback’s movements. Firstly, on Monday morning, the Kiwi surged and its volatility index reached the 3.78 points level – the highest among all the volatility indexes during the week. Then Tuesday started with disappointing UK CPI and PPI releases, and the pound’s index met the 1.78 points level. Finally, oil prices drop on Friday caused the second highest market volatility peak.
The Greenback’s significance measure held above its usual level for almost the whole period, fluctuating around 0.63 points during the first four days. However, there was a significant drop on Friday, and the measure ended the week on the 0.36 points level. Meanwhile, the average values of component correlations were very similar to the previous week’s readings. The most noticeable changes occurred in correlations between USD/EUR and USD/GBP, where the bond has strengthened by 0.13 points.
During past five trading days, the British Pound was a clear outperformer on the market. This currency surged considerably by as much as 1.32% from Wednesday of the previous week till Tuesday of this week, only losing against the US Dollar by 0.03%, which itself climbed 1.37% across the board. The Sterling has also traded clearly above the baseline since the second part of Thursday, while hovering below it on March 25. Australian and New Zealand dollars, in turn, were the major losers last week, which resulted in a drop of their crosses with the Pound of 2.08% and 1.34%, respectively.
Following the unusually high volatility of the Sterling two weeks ago, last week this indicator returned closer to the norm, with most of time being tranquil, rather than turbulent. Portions of the elevated volatility for the Pound stayed at just 22%, even though it has significantly exceeded the market’s average at 10%. Meanwhile, the average volatility hovered well under the mean level at 0.77 points last week, while the period’s minimum was set just at 0.35 points and below the market’s 0.38. The most turbulent currency pairs with the British Pound used to be GBP/JPY and GBP/CAD, as they both spent around 32% of all time above the normal volatility level.
The period was rich with influential economic releases on all the major currencies, so there were several periods of high and low correlation between different GBP pairs. As a result, the distributions of the components had quite heavy tails in the majority of all cases. The composite itself, which measures the significance of the Pound on the market, stayed at 0.43 on average, slightly higher than both 20 and 130-day averages, but almost the same as the preceding week’s level. Meanwhile, GBP/USD and GBP/EUR, along with GBP/EUR and GBP/CAD demonstrated one of the lowest correlations for the second week in a row.
The past week was quite successful for the single currency. The Euro Currency Index was ranging around the base line during almost the whole period, however, on Thursday, ahead of the ECB monetary policy meeting the index started to grow. Thus the EUR index ended the period with the third best result (100.56), losing only to the US dollar (100.71) and the Swiss franc (101.08).
In a terms of the elevated volatility, the market and the Euro continued the previous week tendency, and their volatility have declined even more. Thus the portions of elevated volatility of the aggregate and EUR were only 11% and 13% respectively. For the most of the components the past week also was rather tranquil, and they spent above the historical level 6% - 22% of the period. The exception were EUR/GBP and EUR/AUD, the components showed relatively high results, having held above the 1-point level 35% and 37% of the observed week. The highest peaks of the market and EUR volatility indexes did not even reach 2 points. Among the components, only EUR/CAD managed to overcome the 2-point level.
For the second week in a row the single currency significance measure continued to decrease. Thus in a five trading days the composite has weakened by 0.15 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/USD correlations with EUR/GBP and EUR/NZD—averages gained 0.08 and lost 0.08 points respectively. Most of the correlation distributions, have concentrated at the level of averages, almost entirely having lost the upper tail.
The period was unsuccessful for the Aussie – steadily depreciating during the week its index finished the period with almost 2% loss. A rest of the currency indexes in the end of the trading week were ranked between the 99.4 and 100.7 points levels. The Loonie shared the best performer’s position with the Euro, both indexes demonstrated 0.7% growth. The former notably surged on Tuesday, in reaction to more optimistic than expected GDP release. The Canadian dollar strengthened further against the background of manufacturing PMI and trade data releases. The Euro index, in turn, significantly grew on Thursday, when the ECB report on monetary policy meeting was published.
The past week was relatively tranquil for the market and all observed currencies. The Greenback and the market volatility indexes climbed above the historical level only in 15% and 11% of time, respectively. In terms of the portion of elevated volatility, the Aussie and the pound were the most turbulent currencies, both posting a reading above 20%. However, the values were not very high, pointing out that the economic events did not critically influence the currencies. Completely different situation was observed in Loonie’s and Greenback’s cases. The former notably reacted to the Canadian GDP release on Tuesday and its volatility index spiked to the 1.86 points level. The 3.0 peak of the USD Volatility Index was the highest among its peers. Nevertheless, their volatilities were above the average historical level for only 15% of time.
The dollar’s significance measure remained moderate, but stable, with only a few news-driven deviations from its mid-term average level of 0.5 points. The composite held above the majority of its peers throughout most of the period, highlighting relative dependence of the Greenback’s movements across the observed pairs. However, there were several times when other composites took the leading position. For example, the Aussie’s significance measure was richly supported by the currency’s prolonged weakening, while other top and bottom performers were changing too frequently to mark out any specific gauges.
[ul]
[li]One of the biggest stories on the global economic arena remains the weakness in commodity prices, particularly oil. Precipitous decline in crude oil over the past several months has been expected to be a net positive for many developed and emerging countries including the US, Europe, India, and China, which are net oil importers. However, oil and commodity exporters such as Canada and Australia have already been severely hit by decline in commodities. Adding to this diverging monetary policy around the world, we get a two-speed global economic recovery. Yet, both short and long term outlook continues to improve, as findings of Dukascopy Sentiment Index survey showed in March.
[/li][li]Professors’ sentiment towards Europe’s six month economic outlook skyrocketed in March, jumping to 0.49 up from 0.39 in the preceding month. It appears the the short and long term economic expectations have brightened as ECB has launched its massive 1 trillion QE programme on March 5 and Governor Mario Draghi’s has stated a sustained economic recovery is finally taking hold in the currency bloc thanks to the central bank’s stimulus as well as cheaper oil prices.
[/li][li]While uncertainty remains over the timing of US interest rate hike and Canada suffers from plunging oil prices, professors were confident in the region’s economic future. Both six-month and three-year economic outlook improved in March.
[/li][li]Central banks in China, Australia, Japan and New Zealand decided to maintain their accommodative monetary policy stance in March to support their economies, further indicating that the region’s economy has been struggling due to a number of international and domestic headwinds. Thus, six-month and three-year economic sentiment index declined in March, reflecting professors’ concerns over the Asian-Pacific economy’s health.
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Even though the Australian Dollar performed in the most negative way among major currencies in the beginning of the period, this currency managed to overcome weakness and finish the trading week ahead of four its counterparts. All in all, the Aussie has only decreased by 0.12% from Wednesday of the previous week till Tuesday of this week. At the same time, the most significant decline was registered by the Swedish Krona and Japanese Yen, which slumped 1.04% and 0.62%, respectively. Moreover, the Nordic currency is also currently having the strongest yearly plunge which amounts to 15.22%.
The past week was marked by the higher portion of the elevated volatility, compared with the market average level, while the AUD Volatility Index held above the historical level for more than 32% of the observed period, still remaining broadly silent. Market elevated volatility, in turn, was as low as just 17%. Among Aussie’s index components, AUD/CAD currency pair was elevated in 44% of the time, followed by AUD/NZD with 38%. Nevertheless, with the exception of a few peaks, volatility indexes did not exceed a 1.5 points level. The most noticeable volatility spikes occurred in pairs AUD/JPY and AUD/CAD, whose indexes surged to 5.55 and 6.08 marks, respectively.
The AUD composite’s correlations held on exceptionally high levels throughout the period, compared with the many other currencies from our previous reviews. The average level of the week stood as high as 0.56 points, helped by many currency pairs of the Australian Dollar that moved in a pretty much the same direction. It resulted in the shorter than usually tails of violins, which prolonged below zero only in a few cases. In the meantime, the composite itself used to be volatile and registered a number of important spikes and falls, helped by some particular data releases in different countries, especially the US.
After a quite successful month the single currency and the Swiss franc again have become the worst performers of the week. Loosing against all other observed currencies, the Euro has depreciated by 1.6%. The decrease of the franc was a little less — 1.44%. For the other observed European currencies, GBP and SEK, as well as for the yen the past week also was failed. At the same time, the most notable growth was observed in the Pacific currencies, which managed to recover from drop of the previous period. During five trading days the Kiwi and the Aussie have gained 1.59% and 2.42%, respectively.
The week was rather tranquil with only few events that notably influenced the market volatility. The most volatile in terms of both, the index’s values and elevated volatility portion, was the Aussie. Its volatility measure has spent 19% of time above the 1.0 level, which indicates the average historical level. Moreover, on Tuesday morning, after the publication of RBA rate statement, the gauge reached the 4.52 points mark, which was the highest value among its counterparts during the period. Friday’s release of disappointing US nonfarm payrolls was one more event, which significantly affected the domestic currency’s volatility – the USD Volatility index met the 3.14 points mark and the market volatility index surged to the 1.95 points. Thus, it became the most resonant event of the period.
The past week was marked by a several ups-and-downs of the Euro significance measure. The composite was fluctuating in a range of 0.22 to 0.55. Despite the generally upward trend, the average values of the composite and most of its EUR/USD components stayed almost unchanged, gaining or losing 0-0.08 points. The most notable development occurred in the bond between EUR/USD and EUR/CHF. Thus the average value has strengthened by 0.21 points. Compared with the long-term values, all observed averages were in line with the monthly values.
The past week was almost a mirror image of the one ending on April 3, as many indexes switched sides around the baseline. The dollar and the Aussie made the most noteworthy recoveries, rising their indexes from the two worst to the two best positions. Both gauges enjoyed steady growth after early sharp jumps, the Greenback’s measure crossing above the baseline as the demand for the currency rose back from the Friday’s low on Monday, while the Aussie’s index surged on Tuesday, when the RBA surprised the market by leaving the interest rate at 2.25%. Conversely, the Euro’s, the krona’s, and the franc’s gauges were tumbling down throughout the period, erasing previous gains and ultimately ending the week well below their peers.
The week was relatively calm for the market in general and all the observed currencies in particular. The Aussie was the most volatile currency, with its index holding above the average historical level in 19% of time and reached a 4.46 peak on Tuesday after the RBA rate statement publication. The most conspicuous 1.55 points peak of the market volatility index took place a few hours later, when the Euro zone and the UK services PMI were announced. Moreover, the volatility of both EUR/USD and GBP/USD pairs reached the week’s maxima at that moment. Wednesday’s turbulence was fully associated with news on the US economy, but the volatility spike on Friday was provoked by the release of optimistic Canadian housing data.
The US dollar’s significance measure showed a downward trend during the past week. Thus, in a five-day period the measure has lost more than 0.3 points. Nonetheless, the average values of the composite and its USD/EUR components stayed on their usual levels. Compared with the previous period, when the average correlations declined slightly, the past week’s values gained from 0.01 to 0.19 points.
Despite rather volatile movements throughout the seven-day period between April 8 and April 14, the British currency was broadly unchanged on a weekly basis. The mixed situation could also be observed with other currencies on the market. As a result of that, the Sterling managed to gain value against three other major currencies, while declining versus five of them. Most noticeably, the Pound surged 1.41% in its currency pair with the Euro, which has been a clear under-performer of the period and lost 1.53%. On the other hand, the Yen jumped the most by 1.17% during period, and EUR/JPY alone falling by 0.99%.
The British Pound continued to show moderate volatility numbers during the period ended April 14. However, this time we could definitely observe major spikes and downturns throughout the week, when strongly tranquil periods were surprisingly changed by turbulence indicators above the norm. In the meantime, elevated volatility of the British currency stayed as low as 29%, meaning that the Pound remained silent for most of the time from Wednesday of last week till Tuesday of this week. Nevertheless, this number still managed to exceed the market mean of just 22%. The most turbulent currency pair, however, used to be GBP/AUD, which was volatile 32% of all time.
The period was rich with influential economic releases on all the major currencies, thus posting rather volatile correlations. Despite that, the distributions of the components had quite short but wide tails in the majority of all cases, except GBP/EUR with GBP/USD. The composite itself, which measures the significance of the Pound on the market, stayed at 0.44 on average, higher than both 20 and 130-day averages, and just slightly above the level seen two weeks ago in our previous review. Meanwhile, GBP/USD and GBP/EUR, along with GBP/EUR and GBP/JPY demonstrated one of the lowest correlations during the week, at 0.14 and 0.27 points on average, respectively.
The EUR Index slowed down in the descent that took off on April 6, but continued to move in a downward direction, finishing the period below most of its peers. The only currency to lose to the Euro was the Greenback, whose weakening began with disappointing retail sales on Tuesday and was further supported by negative manufacturing index and worse-than-expected industrial production reported on Wednesday. On the other side of the baseline, the Canadian dollar took the lead after Governor Poloz’s optimistic comments at the BoC press conference. The index gained 1.8 points in two and a half hours and ended up more than 1 point above its closest peer.
The past two trading days added plenty of disturbance to the market, lifting the elevated volatility portions from around 20% for the period ending on April 14 to over 45% in the latest readings. The Euro was one of the most volatile observed currencies, thought mostly due to the separate pairs’ sharp reactions to developments in the peer economies. Among other currencies, the Canadian and the Australian dollars reached the highest volatility peaks, both on an upsurge, as the Loonie spiked against the background of the BoC conference, and the Aussie was pushed up by remarkable employment numbers. Additionally, the Loonie, coupled with the Euro, produced the two greatest elevated volatility portions.
The Euro significance measure remained around its usual level throughout the past week. Thus, compared with the previous period’s values, averages of the composite and most its EUR/USD components have changed by only 0-0.07 points. The exception was the bond between EUR/USD and EUR/SEK, which has strengthened by notable 0.18 points. The same pattern was observed in relation to the long-term readings, with most of the latest averages staying close to their monthly values, and EUR/USD-EUR/SEK measure exceeding its by over 0.1 points.
After enjoying a week of steady growth in the previous period, the USD Index was again hit by disappointing fundamentals, sending the measure into a downslide and ultimately putting it over 1% below its closest peer. Meanwhile, most of the other observed indexes were more tranquil, with their changes less sharp and their trends less pronounced. Notable exceptions were the Loonie’s and the Aussie’s gauges, with the former surging against the background of the BoC conference and inflation and sales numbers, and the latter dipping in response to the poor Chinese trade balance and then jumping on optimistic Australian labor data.
The past week saw the portion of elevated volatility rise above 50% for the first time in two months, but the burst of activity could be easily explained by the host of influential economic releases. The most conspicuous volatility peaks were associated with the news on Canada’s economy. Optimistic BoC Governor Poloz’s statement and bullish monetary policy report drove the currency’s volatility measure to the 3.95 mark. But that proved not to be the limit, as on Friday, after the announcement of surprisingly high CPI, it reached the 5.0 level. Thus, the event became the most resonant during the week, and the market volatility surged to the 2.15 mark.
The past period was peculiar for the US dollar’s significance measure, as it had a clear competitor in the form of its Canadian counterpart. The two major falls of the USD composite — one on Wednesday and one on Friday, — were both caused by the weakening of bonds between USD/CAD and other pairs, and took place amid the surges of the Loonie’s measure. The Australian dollar’s composite was another gauge that aimed for the top place. It dominated over its peers during the first day of the period, though failed to bring any serious disturbances to the Greenback’s measure.
So far this year, the markets have been calm, being characterised by persisting trends. Nonetheless, we can hardly describe the first quarter as dull. The impact of some of the events during the first three months of 2015 extended beyond the changes in the exchange rates; to a certain degree, they even changed the landscape of the forex industry.
Meanwhile, growth in the developed world remains elusive, and the emerging markets fail as a good alternative. However, the prospects are bright, and we finally seem to be at the dawn of a healthy recovery outside the United States. Draghi has finally launched the QE last quarter, the Fed is about to hike the interest rate, and the Bank of Japan remains committed to fight off deflation despite the setbacks in the past.
The topics that will define the new quarter are largely related to Europe: the general election in the United Kingdom and the debt crisis in Greece. In the second half of the year, the focus should fully shift to the path of the interest rates in the United States and to the question of more stimulus measures to prop up growth in Japan, and we are sure to expand more on this in the next issues of our quarterly report.
We retain an upbeat outlook on the themes of the next three months, as they should eventually reach a logical and positive closure. Indeed, it must be acknowledged that there is still a heap of problems, and they may well stay us even after 2015, but we are encouraged by receding unease and growing confidence in the market. However, this does not mean we should let our guard down. These periods tend to conceal significant risks so, on the contrary, vigilance should be increased.
The Canadian Dollar could certainly be considered one of the most active currencies of the April 15-21 time period. The CAD Index hovered above the baseline for the vast part of the week, which provided this currency with the third biggest increase in weekly value which amounted to 0.68%. The index showed a positive trend right from the second part of Wednesday until Monday’s evening, when it fell marginally. Meanwhile, the currency rose against the majority of its observed peers, including USD and JPY by 1.74% and 1.89%, while it declined only against NZD and CHF by 0.38% and 0.15%, respectively.
The beginning of the analysed time period proved to be significantly more turbulent than last two days of it, still leaving the overall market volatility uplifted. Elevated volatility for the Canadian currency was located just above the market average at 54 versus 52 points, respectively. The CAD/CHF currency cross seemed to have the highest indicator of elevated volatility at 56 points, while the AUD/CAD pair was the least volatile with just 44%. Concerning the maximum volatility index, the Canadian Dollar has also significantly exceeded the market mean at 5.24 vs 2.15 points.
The Canadian Dollar’s correlations were on a rather high level throughout the period. Significance of the Canadian currency, calculated as an average correlation between different CAD crosses, was mixed with lots of ups and downs. Such strong movements were mostly caused by big portions of news both from Canada, Europe and US, as the significance index swung between 0.85 and 0.35 during different time periods. Among currency pairs, the highest correlation coefficient of CAD/EUR pair was observed with CAD/SEK cross during the period, namely 0.78 points.
The past period was hugely successful for the British pound. Spending the first three days at the base level, the GBP Index surged to 101.5 right after the UK BoE minutes were published. From there on, the Index held well above the baseline and maintained the leading position. The week was much less fortunate for the Asia-Pacific currencies and the Swedish krona. Thus, during the April 22-23 Asian session, the Kiwi’s measure has lost more than 2 points and became the main loser of the period. The krona, in turn, held below its peer currencies for the whole period. Among other currencies, the franc suffered the sharpest downslide when the SNB announced a cut in exemptions from its negative rate policy. The CHF index reached the week’s minimum of 98.7, but pared the losses almost as swiftly as it incurred them, and ended the period with a 0.14% gain.
Market volatility evolved in an ordinary pattern during the week, showing moderate turbulence during the European trading session and decreasing overnight. The most changeable and thus the most volatile was the Swiss franc, whose index spent 50% of time above the 1.0 point level. The Aussie, in turn, was the most tranquil in terms of elevated volatility portion, though its index spiked notably several times in reaction to RBA Stevens’ speech and meeting minutes, as well as the CPI announcement. The most conspicuous surge of the market volatility was observed on Friday – the Canadian CPI managed both the DB and the EUR Volatility Indexes to cross the 2.0 points level, while the Loonie’s volatility measure almost met the 5.0 points mark.
The Euro’s significance measure covered the whole spectrum of its historical values in the past period, with the lower readings affected greatly by the franc’s tumble after the SNB announced the expansion of its negative rate policy. The reaction was well seen in the EUR/USD-EUR/CHF correlation distribution, which slid down to its lowest long-term values, cutting its average to 0.29 points from the previous period’s 0.51. Among other EUR/USD components, there was virtually no shifts neither from the previous readings nor from the long-term records.
The past period proved to be a bumpy ride for the USD Index, as it struggled and failed to recover from the previous week’s loses, ultimately winding up slightly below the baseline. Among other losers, the franc’s measure suffered the sharpest fall after the SNB announced the expansion of its negative rate policy on Wednesday. The Kiwi’s gauge, in turn, went into the lengthiest downslide when the RBNZ’s assistant governor McDermott said the bank could consider lowering interest rates on signs of worsening inflationary situation. Meanwhile, the GBP Index posted the greatest weekly gain, pushed up by the hawkish BoE minutes.
The past week was quite turbulent for both the market and the US dollar, as the Greenback’s and the DB volatility indexes held above their historical levels for the 33% and 38%, respectively. However, the latest values were lower than the previous readings, making the past five trading days 7%-34% less volatile for the USD index and its components. The exception was the USD/CHF index, whose portion of elevated volatility rose by 44%, indicating the greatest turbulence among the dollar’s pairs. As for the values of volatility itself, the peaks were rather low, with the highest spike of the USD index not reaching even the 1.5 point mark.
The average correlation of the USD pairs was very changeable during the week, varying in a wide range of 0.33-0.71 points. The mean levels of almost all USD/EUR components were below their monthly readings, which pointed out relative insignificance of the Greenback. At the same time, USD/CHF was the only instrument whose bond with the most traded pair was weaker than its yearly measure. It is worth noting that the Swiss franc was one of the main competitors for the dollar, as its significance measure surged to the 0.89 points mark on Wednesday, which managed the USD gauge to drop to 0.3-0.4 points – the lowest level of the week.
The British currency stayed strong throughout the vast part of the period from April 22 till April 28, by out-performing the majority of its counterparts and registering the second largest gain on a weekly basis. Except the first part of Wednesday, the Sterling traded well above the baseline in course of other days of the period. Until Friday, the Pound was leading market gains; however, a strong advance in the value of the Australian Dollar pushed GBP to the second place. In the meantime, last week’s major losers used to be the US Dollar and Swiss Franc, as both of them posted an equal slump in value that amounted to 1.73%.
As can be seen from the main volatility chart, periods with exceptionally high turbulence indicators were usually changed by time slots with low volatility of the Pound. The portion of elevated GBP volatility at 33% was slightly below that of the market average of 36%. The highest elevated volatility indicator was posted by GBP/CHF currency pair, as this cross used to be increasingly volatile in 50% of all time. On the other hand, GBP/AUD registered the lowest volatility among all major currency pairs of the Sterling, as it remained tranquil in 86% of all time during the period from last Wednesday until Tuesday of this week.
Significance of the GBP, calculated as an average correlation between different crosses of this currency, was at rather high levels during the reported trading period. It can be observed that the composite developed in many ways on a positive side from the historical average level of 0.35, as the mean correlation coefficient stayed at 0.37 points. Especially high correlations of different Sterling’s currency pairs were seen in the beginning and in the end of the period, while weekly lows were reached in the night between Thursday and Friday just around 0.10 points.
