23 Mar 2015
More volatility in the FX market here to stay - ANZ
FXStreet (Bali) - It looks as though more volatility in the FX market is here to stay, notes the ANZ Research Team.
Key Quotes
"Last week marked an interesting week for financial markets, serving as a taste of what is to come – higher levels of volatility. While there remain some key overarching themes, such as USD outperformance, global bond market strength and the march higher in global equities, what was notable last week was how volatile the week was. So what was the source of that volatility? Monetary policy uncertainty."
"In 2014, while the Fed was tapering its QE program, actual monetary policy tightening was more of a concern for the future. Global monetary policy was on a ultra-stimulatory path. Arguably, this saw volatility fall, with implied FX volatility dropping to historical lows over the mid-part of the year. But fast forward to today, and implied FX volatility has lifted sharply (although back to more normal levels), with the Fed closer to the day when it will begin to withdraw stimulus."
"With the ECB embarking on QE, global monetary policy (from the G3 at least) is diverging again. With markets grappling with the exact timing and extent of potential moves (economic data has just come a lot more important and there are some key Fed speeches this week), it looks as though more volatility is here to stay."
Key Quotes
"Last week marked an interesting week for financial markets, serving as a taste of what is to come – higher levels of volatility. While there remain some key overarching themes, such as USD outperformance, global bond market strength and the march higher in global equities, what was notable last week was how volatile the week was. So what was the source of that volatility? Monetary policy uncertainty."
"In 2014, while the Fed was tapering its QE program, actual monetary policy tightening was more of a concern for the future. Global monetary policy was on a ultra-stimulatory path. Arguably, this saw volatility fall, with implied FX volatility dropping to historical lows over the mid-part of the year. But fast forward to today, and implied FX volatility has lifted sharply (although back to more normal levels), with the Fed closer to the day when it will begin to withdraw stimulus."
"With the ECB embarking on QE, global monetary policy (from the G3 at least) is diverging again. With markets grappling with the exact timing and extent of potential moves (economic data has just come a lot more important and there are some key Fed speeches this week), it looks as though more volatility is here to stay."