April 28 proved to be a defining day of the period, as the indexes that until then held compactly around the baseline suddenly diverged, putting themselves well into depreciation and appreciation areas. The EUR Index was among those that started to rise, and eventually managed to outpace all of its counterparts. The single currency posted weekly gains of over 1% against seven out of its eight major peers, with the greatest strengthening falling at EUR/JPY and EUR/USD. The only currency to post virtually no losses against the Euro was the krona, whose index got a kick-start from Riksbank’s decision to keep interest rates unchanged, and dominated over the single currency’s measure until Thursday afternoon.
The portion of elevated volatility across the observed currencies held around 40% for the third week in a row, signaling continuous acceleration of activity on the market. The most turbulent currency was the Kiwi, whose index held above its historical level for 50% of time. It also reached the highest volatility peak as the discouraging statement form the RBNZ on Wednesday pushed the currency down, raising its volatility index to the 5.3 mark. The Swiss franc, in turn, was one of the most tranquil currencies of the past week. However, on Wednesday, the SEK index jumped to 3.74 points with the Riksbank’s interest rate decision, thus posting the second highest result of the period.
The Euro’s significance measure spent a notable part of the period on subdued levels, with most downward pressure coming from the Swiss franc’s components. The effect was most pronounced in the EUR/CHF correlation with EUR/AUD, EUR/GBP, and EUR/USD, which went as far as to cross into the negative area. Distribution plots also showed some weakening in the EUR/USD bond with the EUR/SEK, EUR/GBP, EUR/AUD, and EUR/NZD. Meanwhile, the most traded pair’s correlation with the EUR/JPY cross was notably elevated, with the period’s average more than 0.3 points above the long-term values.
The week was rather unsuccessful for the Greenback as throughout the week its currency index remained in the negative area and finished the period at the level of 0.5 points below the baseline. However, there were several currencies, which significantly appreciated during the week. The Euro and the krona were evident leaders in this term. They both started to grow on Wednesday and, besides, the day was full of “surprises” for different currencies. The krona’s 1% surge in the morning followed the Riksbank’s decision to keep the repo rate unchanged and to extend bond-buying programme, the franc experienced the same change few hours later, but the evening was marked with 1% drop of the Kiwi’s index, which was provoked by the RBNZ’s monetary policy statement.
The period could be divided in two parts according to the market turbulence. If the portion of elevated market volatility during the first two days of the week was only 25%, then during the rest of the period the market volatility measure was above the 1-level (which indicates the average historical level) in 58% of time. The franc was the most turbulent at the beginning of the week, however, full of influential news Wednesday managed readjustments and some conspicuous spikes were observed in other currencies’ volatility. The immediate krona’s reaction to the Riksbank’s monetary policy decisions was reflected in the 3.71 points spike of the SEK Volatility Index as well as the RBNZ’s monetary policy statement induced the 5.23 peak of the Kiwi’s turbulence measure. It is worth noting that NZD was the most volatile currency that week.
During the week the correlations of the USD pairs were very close to the average monthly levels. Moreover, the composite was varying in narrow range around the monthly average with several drops and surges of the gauge pointing out the relative significance of the news releases and thus the currencies, which reacted to the news.
Last week, we have observed a clear divergence between gainers and losers. Swiss Franc, Euro and Swedish Krona were the only period’s positive performers, and all of them surged more than 2%. On the other hand, other currencies dropped, and the Aussie used to be among them. Overall, during the weekly time this currency fell by 0.84%, while a clear underperformer was the Kiwi (-3.41%), which registered the most noticeable slump for a second week in a row. It gave the opportunity for the Aussie to register its fastest advance of 2.32% exactly against its New Zealand’s peer.
The past week was marked by very high portion of the elevated volatility, compared both with our previous reports on this currency and with the market average level, as the AUD Volatility Index held above the historical level for more than 52% of the observed period. Market elevated volatility, in turn, was slightly below at 51%. Among Aussie’s index components, AUD/SEK currency pair was elevated in 60% of the time, followed by AUD/NZD with 56%. Nevertheless, with a few exceptions, volatility indexes did not exceed a 2 points level. The most noticeable volatility spikes occurred in pair AUD/NZD, whose index surged to 5.77 points during the peak.
The AUD composite’s correlations continued to hold on exceptionally high levels throughout the period, particularly compared with the many other currencies from our previous reviews. The average level of the week stood as high as 0.55 points, which has been slightly above both monthly, 6-month and yearly figures. It resulted in the shorter than usually tails of violins, which prolonged below zero only in a few cases, such as AUD/EUR’s correlation with AUD/CAD. In the meantime, the composite itself used to be tranquil in terms of volatility and registered only one strong spike, helped by news from the Australia’s central bank on Tuesday.
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 franc’s measure retained the uptrend it took up on April 29 and strengthened it at the end of the period, supported by the dollar’s weakness and the global bond sell-off. The krona’s gauge also managed to pick up in the past two days, outpacing its peers despite some disappointing Swedish releases. Together with the Euro’s gauge, these indexes formed the top three performers’ list for the period.
During the period, the market volatility was on its average historical level. While the Euro volatility index’s values were very close to those of the market, the Kiwi became the most turbulent currency. Its index spent 46% of time in the area of elevated volatility and reached the 3.84 mark on Tuesday evening, after the disappointing unemployment rate announcement. The peak became the second most notable after the Thursday’s 5.88 spike of pound’s volatility against the background of the UK parliamentary election exit poll release. Moreover, the event became the most resonant for the market, as on Thursday evening the DB Volatility Index surged to the 1.82 points level.
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 0.01-0.08 points. Most of the components started the period at a rather high level, but declined by the end of the week. The drop was most notable in the components containing EUR/CHF, especially in correlations with EUR/AUD and EUR/GBP, which fell into the negative area on Thursday. Most correlation distributions, in turn, shortened their lower tails and concentrated around the averages.
The New Zealand dollar became the worst performer of the period for the third week in a row, this time hit by unexpectedly high unemployment rate released on Tuesday. The week was also far from successful for the Greenback, and the USD Index spent the period in the negative area, ultimately posting the second worst result. Meanwhile, the pound’s gauge, which also showed a downslide, managed to recover, boosted by the UK parliamentary election, and posted one of the greatest weekly gains.
The dollar was largely “underturbulent” compared to the market, holding its volatility measure below the composite index for most of the past week. Its elevated volatility portion and average turbulence also lacked behind those of its peers, and the Loonie’s readings were the only ones to signal calmer behavior. The least stable, in turn, were the Kiwi and the pound. The former kept its volatility index above the historical average for 51% of time, the measure reflecting the uneven tumble of the currency after a disappointing unemployment release. The pound, heavily influenced by the UK parliamentary elections, was little behind its peer, with its longest period of overturbulence starting on late Thursday and lasting throughout the whole Friday’s European session.
The dollar’s significance measure held on a relatively low level during the week, with its USD/EUR components losing 0.05-0.23 points. The most notable decrease was observed in the pair’s bonds with the Pacific currencies, whose composites kept leading positions throughout the week. Such superiority could be explained by a host of Australian news releases, such as RBA interest rate decision, retail sales, employment change, as well as New Zealand’s unemployment rate. The pound was another currency to produce high significance readings. The UK parliamentary election exit poll announcement on Thursday evening managed the pound to appreciate against its peers and, thus, strengthened bonds between its crosses. As a result, the pound’s significance measure reached the 0.9 mark.
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[li]All but one region faced a decline of professors’ sentiment in April due to intense headwinds blowing in every part of the world. Yet, Europe appeared to be a bright spot, as its short-term economic outlook improved in the reported month, despite political and economic turmoil on the continent and British Isles. The North America was the biggest downside contributor to the global economic outlook, as the region saw the biggest deterioration in economic forecasts, as both six-month and three-year economic sentiment indexes fell dramatically.
[/li][li]While in the UK growth has been supported by the services and manufacturing sectors, as well as robust consumer spending, in the Euro zone there were signs that arecently launched QE programmesupported the Euro area’s economic recovery. Yet, political uncertainty continues to weigh on region’s leaders. Hence, short-term economic sentiment inched up last month, albeit to a limited extent. Long-term outlook, however, slightly worsened, according to academia experts’ view.
[/li][li]The recent data from the world’s number one economy questions a possibility of the monetary policy normalization, which is considered to be a sign of sturdy economic performance. Meanwhile, in Canada the negative impact of lower oil prices on the nation’s economy has yet to fade away, while the January rate cut has begun to help put the nation’s economy back on track. The uneven economic performance of the region forced to trim professors’ economic projections both for the upcoming six-month period and for the next three years.
[/li][li]In the Asia-Pacific region worries are mounting over the Chinese economy, which saw the slowest quarterly growth pace in six years. In Japan, the world’s third biggest economy, officials delayed the timing of hitting the price target. Consequently, professors’ economic sentiment deteriorated in April compared to the previous month.
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Without any doubt, the British Pound has been the best performing currency on the foreign exchange in course of the previous working week. There were many influential factors that altogether managed to push the UK currency considerably to the upside. The green performance has been observed against all major currencies, with the biggest increased posted by GBP/NZD and GBP/CHF crosses of 4.49% and 3.47%, respectively. Other currency pairs of the Sterling, however, followed shortly with significant gains as well. In the meantime, the Kiwi lost the most last week, as continuous weakness pushed its currency down by 1.81% on a weekly basis.
Judging from the main volatility chart, it may seem that the Sterling has been increasingly volatile during only one weekly event—the UK General Election on Thursday. However, the real situation used to be slightly different, and the Pound was turbulent for the biggest part of all time throughout the week. Elevated volatility indicator stayed at 54%, which is way above the number seen during two previous weeks. Moreover, the market average elevated volatility of 48% has also been surpassed. Among currency pairs, the most turbulent one used to be the GBP/NZD (62%), reflecting strong divergence between price developments of these two currencies last week.
The period was rich with influential fundamental releases on the Pound, in particular, thus resulting in rather volatile correlations. The distributions of the components have also had quite long and wide tails in the majority of all cases, except GBP/EUR with GBP/CHF. The composite itself, which measures the significance of the Pound on the market, stayed at 0.53 on average, much higher than both 20, 130 and 250-day averages, as well as above the level seen two weeks ago in our previous review. Meanwhile, GBP/CHF and GBP/EUR, along with GBP/EUR and GBP/SEK demonstrated one of the highest correlations during the week at 0.79 and 0.72 points on average, respectively.
The EUR Index was largely fixed during the period, sliding below the baseline in the first day and holding between 99.5 and 100.0 marks till the last. Meanwhile, most of its peers were more animate, though not many managed to end up successful. Besides the Euro’s index, the pound’s and the Aussie’s gauges were the only ones to post gains. The former was sent into a rally by the UK parliamentary election, but the latter started on an uptrend after the release of upbeat home sales and inspiring budget announcement. Ultimately, both measures stabilized around 101.5, leaving their closest peer, the EUR Index, 1% behind. In the depreciation area, the dollar’s gauge came to be the leader, securing the position with a plunge after Wednesday’s retail sales release.
The market volatility was on its average level and mostly followed the general pattern of increased turbulence during the European trading sessions and relative tranquility overnight. The only exception was Friday. The first volatility peak took place in the beginning of the Asian trading session, when the pound soared in reaction to Conservatives’ unexpected triumph in parliamentary elections. Moreover, a lot of influential releases like Swiss CPI, Canadian housing starts, and US unemployment rate were reflected in the greatest spikes of the market activity, and the 74% portion of the elevated volatility during that day. In turn, the most conspicuous and thus the most resonant events during the current week were the weak Swedish CPI release, which managed the SEK Volatility Index to reach the 2.97 mark on Tuesday, and disappointing Wednesday’s US retail sales release, which was followed by the 1.67 surge of the DB Volatility Index.
As the EUR Index was quite reserved in its movements, the single currency’s significance measure was relatively flat, with its values grouping closely around the average of 0.38. The EUR/USD correlation components were also well inside their historical limits, with only combinations with the pound’s and the Pacific crosses standing out for their subdued values. These components lost an average of 0.1 points, and while the EUR/USD-EUR/GBP bond seemed to have strengthened back to normal by the end of the week, the correlations with EUR/AUD and EUR/NZD remained weak during the whole period.
The week was not rich with the US fundamentals, but some of the few noteworthy releases managed to seriously shaken the dollar’s position, causing major downslides and ultimately putting the index below its peers. Meanwhile, the Euro’s gauge posted the greatest weekly growth, as it started on an uptrend against the background of the weakening dollar and ended up outperforming the previous period’s leader – the GBP Index. The latter, fuelled by the previous week’s parliamentary election and supported by the BoE unchanged monetary policy, started the week with a 1.4% gain, but struggled to hold the level and found itself zigzagging around the 101.0 mark.
The past week was rather dull in terms of volatility, as separate events were marked by moderate peaks, and portions of overturbulence kept below 40%. The dollar was the calmest currency on average, but did suffer the third greatest volatility spike as it tumbled on Wednesday. The first two highest marks were hit by the Swedish krona’s and the Kiwi’s indexes. The former shot to 2.9 as the krona plunged after weak CPI release on Tuesday, while the latter surged to 2.7 early Wednesday, stirred up by the Kiwi’s zigzagging reaction to the RBNZ report. Among the dollar’s pairs, EUR/USD and USD/CHF were notable for the second highest elevated volatility portions, marking similar uneven movements of the once-tied currencies.
Despite a few ups-and-downs, the dollar’s significance measure showed an upward trend during the past period. However, the averages of its USD/EUR components posted minimal changes. On the long-term basis, the components’ averages decreased slightly, losing 0.01-0.14 points. The most notable decline was observed in the correlations between USD/EUR and USD/GBP. The only exception was USD/CHF, which has strengthened its correlation with USD/EUR by 0.04 points compared with the monthly value. With regard to the distributions of correlations, most lower tails shifted down and became noticeably heavier.
After exceptionally bullish May 6-12 week for the British currency, during the most recently observed period we have seen some downward correction in its value. Excluding two short-term hikes on Wednesday and Friday, the Sterling traded below the baseline for the rest of the time in course of the week. Among other majors, only the Canadian Dollar traded in a more negative trend, against which the Pound gained 0.86%. On the contrary, the strongest drop was registered by GBP/USD and GBP/SEK pairs, which amounted to 1.1% and 0.7%, respectively. Despite that, the monthly change in the Pound’s value still remains positive at healthy 3%.
UK General Election provided Pound with considerable impetus during the second working week of May, when elevated volatility levels surged past 50%. However, last week the indicator returned back to stay at its historical comfort zone, especially considering lack of fundamental news. The elevated volatility decreased to just 24%, falling even below the market average of 29%. Among currency pairs, the GBP/USD cross used to be the most tranquil with just 21% portion of elevated volatility. Meanwhile, the average turbulence of the Sterling stayed at just 0.79 points, therefore confirming the case of below-the-mean volatilities during the May 13-19 period.
The period was silent in terms of influential fundamental releases on the Pound, in particular, which later resulted in small correlations. The distributions of the components have also had quite long tails in the majority of all cases, except GBP/EUR crosses with GBP/SEK and EUR/CHF. The composite itself, which measures the significance of the Pound on the market, stayed at 0.39 points, broadly matching 20, 130 and 250-day averages. Meanwhile, GBP/CHF and GBP/EUR, along with GBP/EUR and GBP/SEK have historically demonstrated one of the highest correlations of 0.78 and 0.75 points on average, accordingly.
The Euro’s and the dollar’s indexes swapped places again in the past period, with the former tumbling to the worst performer’s position, and the latter rising above all of its peers. Among other noteworthy moves, the NZD Index went through the week’s sharpest surge on Tuesday, when the RBNZ raised its inflation expectations. The franc’s gauge was sent in a downslide with the weaker-than-expected producer and impact prices and the dollar’s rapid recovery on Friday, and the Loonie’s measure went through a similar tumble on Monday. Meanwhile, the GBP Index experienced both a fall and a rise, first hit by a batch of soft data, including negative annual CPI, reported on Tuesday, and then pushed up by a jump in retail sales released on Thursday.
During the period the market was turbulent in only 18% of time in striking contrast to several previous weeks, when the portion of elevated volatility exceeded 40%. However, there still was a great number of economic releases that considerably influenced the currencies’ strength and thus caused some disturbance on the market. It is worth noting that the Euro was the most turbulent currency in terms of both the index’s peaks’ intensity and the percent of time spent above the average historical level. The Aussie, in turn, became the most tranquil one, as it feebly reacted to all domestic economic releases of the week.
The Euro’s significance measure picked up from the previous week’s feeble levels, ranging between 0.3 and 0.8 points throughout the period. Subsequently, the averages of the composite and most EUR/USD components edged up from the previous readings. The most notable strengthening was observed in the bond between EUR/USD and EUR/GBP, which gained near 0.2 points. The period’s averages exceeded the long-term values as well, with the exception of the EUR/JPY component, which came in row with the monthly value.
The USD Index was on a winning streak in the past period, effectively paring the previous week’s losses and reclaiming the best performer’s title. The dollar itself posted over 1.5% growth against all its major peers, with an especially heavy defeat delivered to the Euro, whose gauge lost 2.1% of the base value and finished the period more than 1% below its closest counterpart, the CHF Index. The latter, aside from posting the second greatest loss, seemed to have strengthened its coordination with the Euro’s measure, reminding of the pre-unpegging pattern that was less pronounced in the previous periods, but appeared clear in the second half of the past week.
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 dollar was also relatively calm, but nevertheless was notably more volatile than the market, with its elevated volatility percent second only to the Euro’s reading (25%), and the average and the maximum index values greater than those of all its peers. Among other currencies, the Euro and the Kiwi were the only ones to push their indexes above the 2 points mark, while the Euro, the pound, and the krona—the only ones to keep their indexes above the average historical level for more than 20% of time.
The past period was highly successful for the Greenback’s significance measure. Compared with the previous readings, averages of the composite and all observed USD/EUR components gained 0.05-0.15 points, with the most notable rise observed in the pair’s bonds with the pound’s and the Pacific currencies’ crosses. The composite itself rose by 0.14 points from 0.46 to 0.6. In regard to the monthly values, averages of the composite and its USD/EUR components also increased, gaining 0.02-0.08 points.
Giving leadership to the American Dollar, the British currency traded in the green zone for most of the time during the period from last Wednesday until Tuesday of this week. As a result, the only decline of the Sterling was posted against the Greenback. On the other hand, the common European currency used to be the major under-performer during the previous week (-0.92%); therefore, the Pound managed to gain 1.54% against the Euro. EUR/AUD cross followed shortly with a weekly advance of 1.46%. Meanwhile, the Pound remains the third best yearly performer (+6.05%), after the Buck and Swiss Franc, which gained 16.2% and 9.14%, respectively.
As can be seen from the main volatility chart, turbulence of the British Pound stayed on exceptionally low levels during the period, compared with many preceding weeks. The longest part of the week was spent below the historical average levels. The portion of elevated GBP volatility at 12% was substantially below that of the previous week at 33%. On the relative basis, the highest elevated volatility indicator was posted by GBP/USD and GBP/SEK crosses, as they used to be increasingly volatile in 17% of all time. On the other hand, GBP/NZD registered the lowest volatility among all major currency pairs of the Sterling at just 6%.
Significance of the GBP, calculated as an average correlation between different crosses of this currency, stayed slightly above the historical average levels during the reported trading period. It can be observed that the composite developed in many ways on a positive side from the historical mean of 0.39. It is additionally proved by the mean correlation coefficient settling at 0.43 points, higher than both 6-month and annual readings. As usually, the closest correlation were showed by the GBP/EUR cross with GBP/SEK and GBP/CHF currency pairs at 0.72 and 0.75 points, correspondingly.
The past week was undoubtedly the dollars period, as the USD Index spent the past four trading days towering over its peers after shooting up on Fridays core CPI numbers. The EUR Index, in turn, was less firm and kept below the baseline for most of the period, albeit not showing any heavy downtrends and holding around the level it initially slid to. The least fortunate currencies of the period were the Aussie and the Kiwi, both of which suffered sharp falls on Thursday. Thus, the AUD Index dropped below 99 points as weak actual and projected business investment data freshened the worries over another rate cut. Later that day, the Kiwis gauge tumbled after Fonterra, a dairy cooperative group and New Zealands largest company, trimmed its forecast payout for the country’s largest commodity export.
The period was notably lacking turbulence, as most elevated volatility portions stood below 20% and none of the indexes managed to lift its average to at least 0.80 points. The Euro was amongst the calmest currencies, with only pound and the Kiwi surpassing it in stability. Meanwhile, the strengthening dollar and the feeblish yen were the least tranquil, their overturbulence percentage at 24 and average volatility at 0.79. Additionally, the Greenback and the Aussie reached the highest volatility peaks, both a little over 3.00 points. The dollars index spiked on Fridays inflation data, taking the markets gauge to its periods high, while the Aussies measure surged on Thursday, evoking a much more modest splash of the aggregate.
The Euros significance measure was showing a clear downtrend, losing 0.3 points by the end of the period. The averages of the composite and its EUR/USD components also decreased. Thus, the composites average has lost 0.07 points compared with the previous value. The maximal change took place in correlations between EUR/USD and EUR/SEK. The Swedish trade balance and consumer confidence data released on Wednesday considerably weakened the bond, and the average declined by 0.26. There was also a significant decline in the component containing EUR/JPY. The strengthening of the Greenback on Tuesday morning pushed the yen down, and the component fell from 0.90 to 0.21, and the average dropped by 0.19 points.
The past week was notable for persistent movements of the observed indexes, and the measures were clearly divided into winners (CHF, USD, and EUR) losers (Asia-Pacific currencies), and inbetweeners that kept close to the baseline. The dollar was holding a strong leading position throughout its May 26-28 rally, but on Thursday the Euro’s and the franc’s recovery started to gain pace, and their indexes closed on the Greenback’s gauge. The EUR Index never quite managed to properly outpace its US counterpart, but the franc’s measure surged one point over the USD Index as the Swiss currency reversed its direction sharply after dipping on soft GDP numbers. On the other side of the baseline, the JPY Index moved on a slow downtrend during most of the period, while the Aussie’s and the Kiwi’s gauges crashed on Thursday, when the former was hit by poor business investment data and the latter — by concerns over the implications of the trimmed dairy payout forecast.
The past week was rather calm for the market. The yen became the most turbulent currency, with index holding above its average historical level in 27% of time, however, its values did not exceed the 1.6 mark. The Kiwi, in turn, turned out to be the most tranquil with only 13% portion of elevated volatility, as the only surge of the currency activity was observed on Thursday after Fonterra trimmed its forecast payout for the New Zealand’s largest commodity export. While the highest peak of market volatility index coincided with the spike of the dollars turbulence caused by the batch of the US releases, there were two other conspicuous economic events, which shocked the domestic currencies to a higher degree.
The US dollar’s significance measure was rather unstable during the past week and ranged from 0.4 to 0.77. Nevertheless, averages of the Greenback aggregate and its USD/EUR components remained almost unchanged compared with the previous readings. Thus the maximal change was only 0.06 points large, while the composite has lost 0.02. Compared with the monthly values, the readings have slightly strengthened. The greatest increase (+0.09) was observed in correlations between USD/EUR and USD/JPY, which started to rise on Wednesday after the unexpected improvement of the Japanese retail sales data. Furthermore, on Thursday, after the Japanese economic data came out, the component’s development became even more rapid and it reached the 0.84 level.
The period was important in terms of a number of market movers, as every day of the May 28—June 2 week used to deliver important fundamental data both from the UK and different countries around the world. However, the British currency managed to spend the last week’s time without major spikes or drops, while gradually declining on aggregate during all days of the period. Two currency pairs of the Sterling succeeded in posting an advance, namely GBP/JPY and GBP/NZD, as they gained 0.51% and 0.79%, respectively. On the other hand, the single European currency rallied against the Pound by 2.64% during the previous week, helped by considerably better than expected Euro zone inflation statistics on Tuesday and a general positive sentiment on the Euro since the middle of May’s last week.
Even though the Sterling was nominally twice more volatile during reporting period, compared with one week before, this currency remained broadly tranquil in terms of reactions on important events that happened from Wednesday of last week till Tuesday of this week. The Pound’s elevated volatility indicator stayed at just 23%, up from 11% on week-to-week basis. However, it was somewhat lower than 31% registered by the market, on aggregate. Among currency crosses, GBP/SEK was the most turbulent one, as its elevated volatility hit the 27% mark. From another side of the coin, GBP/NZD was the most silent during the period at just 16%.
Correlations of the Sterling showed no distinct tendency last week, and components were moving in different directions, depending on events that affected any particular currency pair. The composite, however, had an average reading of 0.36 points, broadly in line with historical averages and fully matching the 6-month mean. The distributions of the components have also had quite long tails in the majority of all cases, underlying the fact of generally low correlations. All in all, GBP/CHF and GBP/EUR, along with GBP/EUR and GBP/SEK have historically demonstrated one of the highest correlations of 0.66 and 0.73 points, accordingly.
Index activity picked up in the past trading days, and most notably so for the Euro’s gauge that climbed to almost 103 points and finally posted the greatest weekly gain after a very sluggish May. Following the general pattern of the EUR Index during the week and eventually coming in second-best was the krona’s gauge. Similarly to the Euro’s measure, the SEK Index had its sharpest surge on Wednesday afternoon, jumping from below the baseline to 101.5 points in three hours. Meanwhile, most of the other gauges dipped, with the USD and the CAD Indexes acting as the downslide leaders, their moves enhanced by disappointing US ISM non-manufacturing PMI, and wider-than-expected Canadian trade deficit.
The past trading days injected the market with a solid amount of volatility, raising most of the overturbulence portions above 40%. The Euro was the second most volatile currency in this respect, while the absolute leader was the frank that held its index above the historical average for 50% of time. The highest peak, in turn, was reached by the Aussie’s gauge, as it spiked to 4.0 points on Thursday, when poor trade balance and retail sales data pushed the currency down. The market’s aggregate turbulence reached its maximum on Friday, when several currencies suffered sharp rate changes, with the most notable movements shaking the Loonie, the franc, and the Aussie.
The period could be clearly divided into two parts: prior to Monday noon and after it. The former was marked with negative correlation between EUR/CHF and the other Euro pairs, and weakening bonds in components containing EUR/CAD. A 0.2% fall in GDP and a greater-than-expected rise of the leading indicator notably affected the franc, while the Loonie was shocked by the data showing the country’s economy shrunk in the first quarter. Thus, the composites of these currencies reached the 0.7 mark, pointing out relative importance of their movements during the day and leaving the Euro’s significance measure on a feeble level.
The USD Index failed to hold the position it won during the May 26-29 upsurge, and spent the first week of June mostly below the baseline and among the worst performers. The Euro’s gauge, on the other hand, continued with the pattern of strengthening. Backed by encouraging inflation data, the ECB’s assurances, and hopefulness of the time over the Greek negotiations, the EUR Index went into a three day rally and, together with its Swedish peer, posted the only solid positive change in the past period. Meanwhile, the franc’s measure, which was moving in tandem with the Euro’s during the previous period, fell behind and spent the week at the baseline.
After a lull of the past few weeks, the period was quite volatile for the market and almost all observed currencies. The Swedish krona became the most turbulent currency of the week, with its index spending 48% of time above its average historical level. The measure for the Euro and the Aussie, whose heightened volatility was mostly caused by the ECB monetary policy decision and the unexpectedly low Australian trade balance, respectively, stood at 47%. The aggregate USD index, in turn, was 10% behind the leaders. However, in terms of the peak height, the USD was the undisputed leader (5.33), notably outpacing its peers.
The dollar’s significance measure edged up compared to the long-time readings and held around 0.6 points throughout the week, fueled by the Greenback’s across-the-board movements. With that the measure was among the period’s most stable and strongest composites. As for the USD/EUR components, the pair’s bonds with USD/GBP and USD/SEK were notably higher, while correlations with USD/CHF were weaker than usual. Components with USD/JPY and USD/AUD were the most changeable, with their weekly distributions covering the entirety of the monthly ones.
Helped by busy fundamental data releases’ calendar, the Canadian Dollar could certainly be considered one of the most dynamic currencies during the first week of June. The CAD Index fluctuated all around the baseline for the vast part of the week. While the currency was losing value for three out of five days, it still managed to have a weekly positive change of 0.23%. Among other currencies, the Australian Dollar slumped by 1.42% amid disappointing international trade data, while the Euro continued to hover on the green side, while gaining 1.13% on the weekly basis, therefore under-performing only to the Swedish Krona, which rallied 1.82%.
The beginning and the end of the analysed time period proved to be significantly more tranquil than in the middle of it on Friday, which still left the overall market volatility quite uplifted. Elevated volatility of the Canadian currency was moderately below the market average at 43% versus 48%, respectively. The EUR/CAD currency cross seemed to be the only one to reach the 50% threshold, while NZD/CAD and CAD/JPY pairs were the least volatile with the portion of elevated volatility at just 30% and 32%, and these two components have driven the overall CAD turbulence below the market mean last week.
Significance of the Canadian currency, calculated as an average correlation between different CAD crosses, was mixed with lots of ups and downs during the reporting period. Such strong movements were predominantly generated by news from Canada and US, and the composite was swinging in a wide range between 0.71 and 0.16 points. Among the components, the highest correlation coefficient of CAD/EUR pair was observed with CAD/SEK at 0.81. Meanwhile, the composite has been generally staying flat last week, compared with its six-month and yearly averages around 0.42-0.45 points.
Full report available here.
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[li]As summer was approaching, professors’ sentiment brightened in May. Europe remained a dark spot, as academia experts lost some confidence in the region’s short-term economic performance. Nevertheless, a slight retreat in Europe’s sentiment index was offset by a rise in the North American gauge and a sharp surge in Asia-Pacific’s sentiment index. As a result, the global six month outlook edged higher by 0.04 points in May.
[/li][li]Surprisingly, the global three-year economic outlook index soared by 0.13 points in May, with the major contributor to the increase being professors’ optimistic outlook for Asia-Pacific’s economy.
[/li][li]As the Euro zone is being dragged down by the Greek debt crisis, professors’ consensus expectations for the economic development in the foreseeable future deteriorated. Still, the experts foresee the region’s economy to be out of woods.
[/li][li]Both the short term and long-run economic sentiment index for the North-American economy rose a steady 0.03 in May, as the US, the world’s number one economy, has been recovering following a weak start of the year, while the Canadian economy has been following its neighbour.
[/li][li]The Asian-Pacific economy enjoyed a sharp increase in both the six-month and three-year economic sentiment index in May as Australia and Japan surprised with some positive economic growth data in the reported month, which appeared to contribute positively to the overall perception of the region’s economic health.
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