Dukascopy Market and Economic Research

Highlights of the latest Marker Research release on EUR.
Full research available here​.




This has been a very strong period for the Euro, as the currency gained 0.7% and was among the best performers with the Canadian Dollar, Swedish currency and Swiss Franc. While a clear leader in the negative sense was the Japanese Yen that continued to underperform against all of the currencies for the third straight week, it lost around 2% of its value. Also the Australian Dollar declined, while all the other currencies not mentioned was little changed in the five-day period. However, there are no currencies that performed very well, as none of the majors rose more than 1%, while in the last time of writing two currencies surpassed the level.




Even though there were many important economic data releases through week in the Euro zone, some of the attention was lured away by other more important announcements or data. Nonetheless, in each day at least for some time the volatility index surpassed the normal level. Market’s elevated volatility increased to 26%, after 22% in the previous period, while Euro’s elevated volatility reached 23%, after last week’s drop to 17%. The EUR/CHF cross was the most tranquil with elevated volatility reading only at 8%, which is considerably lower compared to past week’s 32%, when it was the highest level among all the currency pairs.




The Euro significance measure picked up pace through the week, after ending below 0.20 level in the previous period. At the same time, mostly there were nor negative, nor positive correlations between Euro pair’s. The highest level was reached at the first part of Thursday, after the releases of French, German and Euro zone flash manufacturing PMIs that disappointed the Euro bulls. Although, the Euro significance gauge did not manage to hold above the 0.3 mark. Nonetheless, for most of the time through the period the measure was around 0.23.

Highlights of the latest Marker Research release on USD.
Full research available here​.



The USD Index was more confident compared to the previous period, and as its track turned from a flat line to an uptrend, it finished the week with the second highest weekly growth. 0.2 points behind it was the pound’s gauge that surged above 100.5 point level on Wednesday and managed to hold above it for the rest of the period. The best performer, in turn, was the CAD Index, which skyrocketed on Friday, fueled by the stronger than expected Canadian inflation numbers, and posted the highest weekly growth since the end of September. The last day of the period was the most eventful one as it also saw the Aussie and the Kiwi jump in response to the PBOC rate cut, and the Euro tumble with Mario Draghi’s comments on the urgency of the inflation raise and the ECB’s readiness to widen its asset purchase plan.



The overall level of the USD volatility has fallen palpably at the end of October and still has not returned to higher levels. Thus, for the second week in a row, the USD Volatility Index managed to exceed the 1-point mark in only 26% of time. The strength of the volatility surges was also rather moderate, and the maximum peek was only 2.12 points high. In turn, the market volatility has slightly increased compared with the previous week and caught up with the dollar’s gauge, while its maximum peek exceeded that of the Greenback.



The average correlation of the observed USD pairs, which measures significance of the currency, was varying in a wide range of 0.25 – 0.69 points. As can be seen from the violin graph, the correlations during the week were mostly on or below the average correlations of a wider window.

Highlights of the latest Market Research release on GBP.
Full research available here​.



Unlike the previous week, during November 19-25 time period the British pound had a clear trend to gain value. The currency stayed above the baseline for most of the time and managed to surge 1.13% from Wednesday to Tuesday. Therefore, it took the first place among the best performing currencies on the market last week. It surged against its all major counterparts, showing the strongest climb versus the Aussie and Kiwi by 2.38% and 1.59%, respectively. Moreover, the Pound outperformed its Canadian peer, which increased 1.06% during five days and took the second place on the pedestal.



As can be seen from the main volatility chart, the period with the highest turbulence took place in first three days of the period, and especially on Wednesday and Friday. The portion of elevated GBP volatility was slightly above that of the market. GBP/SEK was the only pound’s cross with the parameter smaller than the market’s average of 24%, and with that posted the lowest elevated volatility portion of 19%. Besides that, the most traded GBP pair, the one with the US dollar, showed the largest elevated volatility index from Wednesday to Tuesday, as it has been increasingly turbulent in 40% of the time.




Significance level of the GBP, calculated as an average correlation between different crosses of this currency, was much more volatile during the period, as important news from Britain and other countries significantly weighed on the UK currency. The first major hike of the correlation index up to 0.61 took place on Wednesday. However, the GBP composite managed to stabilize and decreased slightly to the period’s average levels and oscillated just below this level for the vast part of time from November 21. The weekly low at 0.16 was reached on Tuesday, reflecting the smallest correlation among different GBP-crosses.

Highlights of the latest Market Research release on EUR.
Full research available here​.




After a few relatively good weeks for the Euro, this has been a completely different story. The common currency declined against all the major currencies, excepting the Aussie and Swedish currency. However, Swedish Krona and Swiss Franc come basically in line with the 18-nation currency. All the other currencies outperformed the Euro in the range from 0.39%-0.83%, meaning that the outperformance was strong but not significant. The British Pound gained the most, while just near it was the Japanese Yen and US Dollar. However, a clear loser in the period was the Australian Dollar that was trading below 1% in the week and by the end of the period it had lost around 0.95%.




Similarly to the previous week this has been a tranquil one. Both the market and the EUR Volatility Indexes held above the historical level in only around 25% of the time; nonetheless, it is higher reading then in the previous time of writing. The percent of elevated volatility of the components has also improved in the most of the cases. The biggest gainer and the one which had the highest elevated volatility at the same time is EUR/AUD that reached 39%, increasing by 25%. However, the most noticeable spike in volatility happened on Friday, when Draghi’s remarks moved the markets and the EUR volatility index jumped above the 2.5% mark.




The correlations between the EUR pairs were considerably strong during the observed period. Their distributions were notably above both the historical values and the values seen in the last week.
The composite for most of the time were was at moderate values, with the biggest spike on Friday, when Mario Draghi announced that the ECB is ready to act and broaden its asset-purchases programme to drive inflation higher as fast as possible. On Monday the Euro average correlation coefficient remained around the 0.3 level.

Highlights of the latest Market Research release on USD.
Full research available here​.



Because of Mario Draghi’s pessimistic comments on the Euro zone’s economy on Friday, November 21, the single currency started the week at weak position and was growing steadily throughout the observed period. Thus, the Euro and its Swiss counterpart became the top performers of the week. The Greenback continued its steady appreciation and took the third place in terms of index growth. The Aussie, in turn, showed the worst results. Its index managed to lose almost twice as much as the gauge of the second worst performer, the Loonie, which, just like the Euro, returned to the previous Thursday’s level.



The market’s volatility levels remain changeable, and the past week fell on another period of subdued turbulence, with elevated volatility portion below 20% and the index peaks on moderate heights. The dollar’s readings were well in line with the overall market’s mood, and its components mainly followed the paths dictated by the Greenback’s counterparts. USD/JPY was the dollar’s calmest pair, both in terms of the overturbulance portion and the maximum index value, while USD/CAD, GBP/USD, and AUD/USD showed the most disturbance.



The past period was quite a turbulent one for the dollar’s significance measure. There were some ups-and-downs, and the measure fluctuated in a range from 0.3 to 0.6 points. However, the composite’s average value, as well as the averages of most of its components, stayed at about the same level as in the previous week. The most noticeable changes were observed in the EUR/USD correlations with AUD/USD and USD/CAD, whose average values reduced by 0.2 and 0.1 points, respectively. Compared with the longer-term records, the average correlations somewhat declined, and the lower tails of distributions shifted down and became heavier.

Highlights of the latest Market Research release on AUD.
Full research available here​.



The Australian dollar was in the list among the worst performing currencies in the period from November 26 till December 2, as its currency index declined 0.29% in overall amid rather mixed fundamental data. Having a look at components, the AUD rose against three majors, including the Yen, Loonie and Swedish Krona by 0.12%, 0.22% and 0.28%, respectively, but lost value versus other currencies. Among other negative performers, the Swedish krona dropped 0.61% from Wednesday till Tuesday, while Japanese yen slipped as much as 0.42%. On the other hand, US dollar and the Kiwi surged 0.87% and 0.62%, respectively.




Both the elevated volatility proportions and the values of Volatility Indexes of the Australian currency were well above market average levels during the period. Concerning elevated volatility, It is worth pointing out that especially the AUD/NZD cross was unusually dynamic and became the most volatile pair in terms of this indicator during the period, as it was turbulent in 57% of all time, compared to currency’s average of 43% and market’s mean at 34%. Maximum volatility index for the currency pair was registered at 3.1 points, while the smallest one was posted by the AUD cross with Canadian dollar, namely 1.99 points.




The components of the Australian dollar significance measure showed strong correlations over the observed period. The short-term correlations during the period between AUD/EUR and other AUD crosses varied from 0.07 to 0.95. As seen from the main chart, the smallest correlation was with AUD/CAD, particularly on Friday, when a drop closer to zero provided the component the weakest result of the week, as its correlations stood at 0.07. Compared to the 20-day values, most of the correlation pairs have gained 0.01-0.15 points, but AUD/NZD pair added 0.24.

November Release of Dukascopy Bank Sentiment Index
Full report available here

 

1. November was full of economic news which shaped economic sentiment of businesses and consumers all over the globe. While some economies, including the US and UK, have been expanding at full speed, others, such as the Euro zone, Japan, and China raise concerns over their ability to sustain growth and ensure there is no negative spillover effect on other economies. This two-speed global growth appeared to weigh on the sentiment of responders who took part in November’s Dukascopy Sentiment Index survey, as the short-term outlook deteriorated to 0.56, while the long-term sentiment plunged by 0.06 points to 0.62, levels last seen in August 2013.
2. The ECB is still determined to do whatever it takes, including unconventional measures, to bring inflation in the region to healthy levels as soon as possible. Persistent disinflationary trend in the Euro bloc has become a headache for policy makers and growing concerns for economists, as recently implemented fresh stimulus so far failed to provide visible effect. However, Germany, the European powerhouse which had been causing panic among economists due to softer fundamentals, managed to escape technical recession. Thus, the short term sentiment for Europe improved modestly, while the three-year economic mood continues to deteriorate.
3. Despite a robust growth in the US and Canada, academia experts appeared to be less optimistic about the region’s short-term and long-term economic perspectives, as both gauges fell in November, but remained at strong levels.
4. Asia-Pacific also saw their sentiment indicators retreating in November, possibly due to growing concerns over Japan’s and China’s economic performance, as world’s leading countries show worrying signs of slowing economic activity.

Highlights of the latest Market Research release on EUR.
Full research available here​.



The Euro has rebounded from last week’s decline, when it slipped against almost all of the major currencies. While this week Euro was outperformed by only the very strong US Dollar and British, Canadian currencies. The worst performer for second week straight is the Australian Dollar. Moreover, it seems that the Kiwi is starting to lose its relatively stable positions and is following its Australian peer due to the price drop in commodities. Also, the Japanese Yen has returned to its losing streak, after gaining for one week. The strongest performers were the US Dollar and British Pound that added 0.77% and 0.46% to their value, respectively.




The market’s and Euro’s elevated volatility has almost doubled since the previous time of writing, as it has reached 45% and 46%, respectively, after being at 25% a week ago. However, the fact that high volatility was observed in 23% of time for some components and 60% for others, pointed out that the turbulence on the market was caused by Euro only not in the majority of cases. Low volatility indexes readings – average values mostly around 0.9 – suggested the same. The peaks of components’ volatilities also were not provoked by the news on Euro zone’s economy; however, that all, of course, is excepting Thursday, when Draghi pushed the





The EUR significance measure was gradually bouncing to higher and lower levels throughout the period and mostly was below the significance threshold of 0.3. However, in general the mean correlation coefficient was higher than the historical values. The EUR/JPY cross has returned to around its 250 day average, after showing less correlation during the last month due to the poor performance of the Japanese Yen. Also, interestingly EUR/CAD correlation coefficient with EUR/USD decreased in the last week.

Highlights of the latest Market Research release on USD.
Full research available here​.



The past week was a success for the dollar, as it posted considerable gains against its major peers and ended up only 0.1% below the Loonie - the period’s leader. Their Australian counterpart, in turn, was one of the worst performers, and its index suffered the greatest fall, losing 0.62 points over the GDP reading. The greatest, and equally large, surge was observed in the EUR Index, as the single currency was boosted by the ECB statement.



The week was rather turbulent for the market in terms of elevated volatility proportion. Nevertheless, the values of the index were not very high, with the average at 0.95 points. The USD Volatility Index, in turn, had some noticeable spikes, indicating turbulence twice as great as historical. The greatest spikes of almost all index components were associated with Friday’s surprisingly high US nonfarm payrolls data. However, USD pairs with AUD and CAD experienced the highest volatility on Wednesday, against the background of disappointing Australian GDP release and Canadian rate decision, respectively.



The past week was rather tranquil for the US dollar correlations, and there were only a few ups and downs. Mean values of the observed components mostly stayed on the same level compared with the previous week. In turn, tails of the correlation distributions became heavier, indicating the instability of components during the period. The most noticeable changes occurred with the bond between EUR/USD and USD/JPY. An upward trend was observed in the component throughout the whole period, and the gauge ended the week on a very strong level of 0.89, with its average gaining 0.16 points over the previous reading.

Highlights of the latest Market Research release on GBP.
Full research available here​.



The GBP Index was hovering above the baseline for the whole December 3-9 time period on rather positive fundamental data, and at the end of the period posted its greatest weekly growth among all currencies. The index dominated its counterparts throughout the vast part of the period, and with a final 0.68% advance over the base value became the period’s top performer, leaving the second-best CHF gauge behind with a 0.64% rise. However, the pound managed to advance more than 1% only against two currencies, the Australian dollar (+2.17%) and the Kiwi (+1.74%).




From time to tome, the period was notably turbulent, while the pound’s Volatility Index has spent about more than 50% of the first three days above its historical level. The highest portion of elevated volatility in these days was observed in GBP/USD, GBP/SEK, and EUR/GBP around 40%. On the other hand, it is worth pointing out that the average GBP elevated volatility of 38% was just under the market average at 39%. Besides that, surprisingly one of the highest spikes of turbulence was reached by the Pound’s cross with Swiss franc. All in all, the largest GBP volatility peak did not exceed 3 points, but managed to touch more than 2.5% on Friday.




The components of the British pound’s significance measure showed rather small correlations over the observed period, while the overall GBP composite stayed around the average level for the vast part of the period. The short-term correlations during the period between GBP/EUR and other GBP crosses varied from 0.2 to 0.96. As seen from the main chart, the smallest correlation was with GBP/CAD and GBP/USD, particularly on Thursday when a drop below zero provided the component the weakest result of the week, as its correlations stood around 0.20. Compared to the 20-day values, most of the correlation pairs have lost 0.01-0.05 points, but GBP/USD pair tumbled 0.10.

Highlights of the latest Market Research release on EUR.
Full research available here​.




The Europe’s shared currency has gained for a second straight week as it added 0.31%. A clear worst-performer remains the Australian Dollar that has lost more than 4% in the last month. The Canadian Dollar also performed poorly by declining 1.12% in the period, as the oil prices remain very low. However, the best-performers were Japanese Yen and the British Pound, if the Yen rebounded from the last week’s losses then the Sterling has prolonged its advance. Interestingly, the Japanese currency breached even the 1.5% mark on Thursday; however, it failed to sustain the gained bullish momentum.




The market’s elevated volatility remained near the same levels as it were last time of writing, while the Euro was a little calmer compared with the previous week. Most of the currencies were not very volatile, as the measure was around 30%; however, there certainly were some exceptions. For instance, EUR/JPY reached as high as 62%, which is of course above the average value and a substantial increase since a week ago. At the same time, EUR/AUD pair’s volatility was elevated only in 21% of all cases and it is a substantial drop from the past week’s 60%. Also, EUR/CHF fell from 58% to 30% in the period from 5th to 12th of December.




The correlation graphic perfectly shows that the Euro zone was lacking important news and the impact given by the area was minimal. The composite ranged from 0.10 to 0.20 for most of the time, which is low to say the least. The greatest correlations were seen on Friday when the significance measure was near the 0.5 mark. The mean correlation coefficient was not just low, but it was also well below the historical average, as it stood at 0.16. EUR/USD and EUR/CAD correlation was leading the parade, as it returned above the 0.50 level and it even surpassed the 0.60 mark.

Highlights of the latest Market Research release on USD.
Full research available here​.



After the yen’s 1.5% loss during the week ending December 5, the currency fully recovered during the past period, finishing it with a 2.5% appreciation and leaving its peers far behind. Diametrically opposite situation was observed in the Loonie’s index change. It had lost its past 1.2% gain by Wednesday noon and continued to depreciate during the rest of the observed period. The Aussie was another currency to spend the week on a downtrend. As a result, the Canadian and Australian dollars finished the period with a 1.9% loss.



The previous week was the most volatile in the past two months, as several currencies contributed notably to the overall turbulence. Among the most prominent occurrences, the yen’s portion of elevated volatility stood at 80%, greater even than the heightened October readings, and the Kiwi’s Volatility Index reached as high as 7.29 points. The Greenback was calmer than the market in all aspects, and its turbulence measure held below that of its peers on most occasions. The only noteworthy detail about the dollar here is that the USD/JPY elevated volatility portion was higher than the yen’s composite measure, signaling that the pair’s instability was above average for the Asian currency.



The USD significance measure spent the past week zigzagging around a downtrend line, gaining strength and losing its position on several occasions. Still, the average values of the composite and its components edged up from the previous readings. The most noticeable growth was observed in the correlation between EUR/USD and AUD/USD – its mean value increased by 0.21 points. An unusual, almost uniform distribution was observed in correlations of EUR/USD and USD/CAD, as it ranged from -0.04 to 0.75 points during the period.

Highlights of the latest Market Research release on JPY.
Full research available here​.



The JPY Index was located well above the main baseline for the whole time period between December 10 and December 16, as the currency registered the fastest weekly advance among all majors. However, it is worth pointing out that JPY dominated its counterparts only in the end of the period, while on December 11-12 the leadership was taken by the New Zealand’s dollar. Nevertheless, the Yen added 2.03% over five trading days, with posting the fastest rise against the Loonie and Swedish Krona by 3.69% and 3.35%, respectively. Meanwhile, Canadian dollar dropped the most, losing 2.07%.




Even though it may seem that for the most part of period volatility of the Yen was rather quiet, its index was above 1.5 points almost all the time. Especially strong impetus to the turbulence index was provided on Wednesday of the previous week and Tuesday of the current week. Concerning elevated volatility indicators, the Yen posted unusually high results, because it exceed the “normal” zone during 91% in course of the December 10-16 period. Moreover, GBP/JPY currency pair was volatile in 96% of the observed time period. Elevated turbulence for all JPY currency pairs exceeded the market average of 58%, which can also be considered as rather high, compared to a number of weeks before.




It seems that the previous week was rather unusual not only in terms of high volatility and strong gains of the Yen itself, but also because of very strong correlation between different JPY crosses. At the same time, we should notice that the Yen’s composite was swinging both above and below the average level for almost equal periods of time. The short-term correlations during the period between JPY/EUR and other crosses of the Japanese currency ranged from 0.58% to 0.95%, marking very high correlation coefficients. Moreover, the 5-day values exceed 20-day ones by, on average, 0.10-0.15 points.

Highlights of the latest Market Research release on EUR.
Full research available here​.



During the period the Europe’s common currency was mostly above the base value; however, on Thursday the currency slid below the level. The U.S. dollar, in turn, became the top performer of the period with 0.86% Index gain; moreover, the Japanese Yen added 0.85%. The Swedish currency was constantly falling during the last four days, thus finishing Thursday behind its counterparts with 1.47% loss over the base value. The most conspicuous in terms of Currency Index movement dynamics were the Japanese Yen and Swedish Krona, which both experienced several notable drops and recoveries.




Very high volatility levels were seen through the week, especially on Tuesday. The second day of the week was special not just with many events, but also with the fact that high-importance data were released in almost all regions. In Australia—monetary policy meeting minutes were released, in UK—bank stress test results and CPI data, in Euro zone—German and French flash manufacturing figures, in Canada—the manufacturing sales were measured, while in the US—building permits saw the light of day. Meanwhile, Sweden’s central bank stated that they are ready to do whatever it takes to jolt its economy out of a deflation, adding that they




As was seen in both Currency and Volatility Indexes, the single currency alone was not the catalyst of the market throughout the period, since that many data from all over world were released. The observation was well supported by the Euro significance measure, that spent the period on a very feeble level and had a very low average value. Even though, usually the correlation between the Euro pairs are relatively low, this week the components of the composite were concentrating around the zero even more and that is seen by the index falling to 0.07 at the end of the period.

Highlights of the latest Market Research release on USD.
Full research available here​.



The past week appeared to be eventful for all observed currencies, as the each index experienced some sharp changes. The Greenback’s gauge was mostly growing and finished the period on a leading position with a 1.25% gain over the base value. The Swedish krona, in turn, was weakening since the very beginning the period, and by the end of the week its index lost 1.7% to become the worst performer. The only other indexes to finish the period below the baseline were the Euro’s and the Swiss franc’s gauges, which started to lose their positions in the middle of the week.



The past week was rather turbulent for almost all observed currencies. Thus the portion of both the dollar’s and the market’s elevated volatility rose back to October levels, and came at 43% and 56%, respectively. The period was especially noteworthy for the Swedish krona. The Riksbank’s decision to leave the interest rate on hold at 0% caused the lowering of the national currency, and USD/SEK Volatility Index reached an unprecedented value of 12.31, subsequently spending 62% of the week above the 1-point mark. Another highly volatile pair was USD/JPY, which, though not reached the highest peaks, was overturbulent for 64% of the period.



The past period saw the dollar’s significance reduce, with the component distributions notably heavier on their lower tails, and mean values below previous readings. Consequently, the measure was topped by most of its counterparts, holding around the same levels as the Loonie’s, the Aussie’s, and the pound’s gauges. The yen, the Kiwi, and the Swedish krona, for the most part, held their composites dominating the others, indicating most consistency in their movements across the market, while the Euro’s significance, as per usual, lacked behind its peers.

Highlights of the latest Market Research release on GBP.
Full research available here​.



Even though the British pound was far away from being the best performer last week, the GBP Index was hovering above the baseline for the vast part of December 17-23 time period on rather positive fundamental data. The currency, however, managed to increase only 0.23% during the period, both outperforming and underperforming four currencies on the market. US Dollar posted the fastest gain of 1.76%, while the Japanese yen dropped as much as 1.66%, against which the Pound surged 1.67%. Despite that, the GBP went down against USD and CAD, by 1.36% and 1.47%, respectively.




From time to tome, the period was notably turbulent, but the pound’s Volatility Index has spent about more than 50% of the first two days above the average level. The highest portion of elevated volatility in these days was observed in EUR/GBP pair, which was the only one to surpass 50% mark, on aggregate. GBP/USD and GBP/CHF followed with an elevated volatility of around 43-48%. On the other hand, it is worth pointing out that the average GBP elevated volatility of 41% was well above the market average, which stood at 26% only. Meanwhile, the largest GBP volatility peak did not exceed 2.5 points during December 17-23 period.




The components of the British pound’s significance measure showed rather small correlations over the observed period, while the overall GBP composite was volatile for the most part of the period. The short-term correlations during the period between GBP/EUR and other GBP crosses varied from 0.37 to 0.89. As seen from the main chart, the smallest correlation was with GBP/USD, particularly on Wednesday when a drop far below zero provided the component the weakest result of the week, as its correlations stood around 0.05 only. Compared to the 20-day values, most of the correlation pairs gained 0.07-0.16 points, but GBP/USD and GBP/SEK tumbled around 0.10.

Highlights of the latest Market Research release on USD.
Full research available here​.

The past week was short on trading days, but not on market shockers, and the observed currencies managed to go through some notable ups and downs. The SEK Index was the most instable one, with numerous plunges and recoveries ultimately landing it below its peers both on short- and long-term scale. The Greenback’s gauge, on the other hand, remained the leader in the long run, posting overwhelming 10% and 12% growth over the year and the past six months, respectively. On the weekly basis, the USD Index was outpaced only by its Kiwi counterpart that sprinted to the best performer’s position on the Boxing Day.

The holiday week saw a notable decrease in the trading activity, with the portion of elevated market volatility on an incredibly low level of 1%. Despite the US dollar’s movements in the beginning of the week, the USD Volatility Index only managed to exceed the historical average once and for a very brief moment, resulting in the same reduced per cent of overtubulence. Among the USD components, USD/JPY and NZD/USD volatility failed to rise out of the tranquil area altogether, while GBP/USD, USD/CAD, and USD/SEK demonstrated a somewhat higher degree of activity, pushing their portions of elevated volatility to 13-15% of the period.

Previously observed weakening of the dollar’s significance measure was carried over to the past period, leaving the USD composite to trail among the most feeble gauges. Most of the components showed notably reduced average values, while their distributions edged below the significance threshold of 0.3 points, indicating a discord in the Greenback’s movements across the market. Among its counterparts, the Swedish krona kept its component in the dominant position, with the Canadian, Australian, and New Zealand dollars interchanging on the two remaining places of the top three.

Highlights of the latest Market Research release on USD.
Full research available here​.



After the sluggish end of 2014, the dollar skyrocketed into the new year, with its index posting the second best weekly growth and extending its long-term gains further above 10%. The yen was the only currency to join the Greenback in its Friday rush, and the JPY Index finished the period as the best performer with its first positive weekly change since the end of November. The Euro’s gauge, in turn, stood at the head of the losing indexes, giving up on whatever strength it struggled to gain during the Christmas week. The Swedish krona remained the most volatile currency, with the numerous jumps and falls ultimately putting its index below the baseline for the fourth consecutive week.



Volatility picked up somewhat from the previous period, prompted by the last days of 2014 and the first weekend of 2015. The dollar was one of the least turbulent currencies, with its portion of elevated volatility and average composite value below the market readings. The only major that proved to be more tranquil than the Greenback was the Kiwi, whose volatility index exceeded the norm in 8% of the time and posted an average of 0.65 points. Subsequently, NZD/USD was the most stable dollar’s pair, followed closely by USD/JPY and AUD/USD. The most turbulent ones were USD/SEK, GBP/USD, and EUR/USD.



The USD significance measure continued the pattern of the previous periods, as it mostly held on a very moderate level and showed one interval of stronger readings. On the overall, the values did edge up, with the week’s average correlations higher for the composite and most components, and component distributions a little closer to the middles of the long-term violins. However, this did not change the composite’s standings among peer gauges, keeping the dollar among the least market-moving currencies. Notably, the Swedish krona, along with being the most volatile currency, remained the one with the greatest significance measure.

December Release of Dukascopy Bank Sentiment Index
Full report available here.

Summary

1. Mood among professors who took part in the December Sentiment Index poll had brightened ahead of Christmas and New Year holiday season. All the regions saw their indexes of both six-month and three-year economic outlook rising in December, except for Asia-Pacific short term sentiment, which remained unchanged from the previous month.
2. Europe’s economic sentiment indexes inched up despite ongoing economic and political concerns in the continental economy, as well as possibility of a modest slowdown in the UK’s growth rate going into 2015. In light of disappointing TLTRO in December and constantly falling inflation in the Euro zone, the ECB said it would assess whether its current measures are sufficient to bring consumer prices toward its official goal of below but close to 2% and revive growth. In case the bank decides its policies are not enough to end a period of disinflation, that would "imply altering the size, pace and composition of our measures."
3. In North America, the US and Canada’s economies grew more than expected, the recent data showed, with the US economy expanding at the strongest pace in more than decade in the third quarter. This upbeat data is reflected in professors’ economic sentiment, which soared in December.
4. Meanwhile, in Asia-Pacific region, China, the world’s second biggest-economy, is set for a “hard landing”, Japan’s economy contracted more than expected in the third quarter, and Moody’s downgraded Japan’s rating. The RBA is seen cutting interest rates amid slowdown in the Australian economy, which showed the weakest growth since the beginning of 2013. Academia experts’ assessment of the economic situation in the region in six month from now remained unchanged from the previous months, while long-term sentiment index climbed modestly in December.

Quarterly Report: Q1 of 2015​

It may seem the main FX topics for 2015 are crystal clear–appreciation of the US Dollar amid the highly-anticipated Fed rate hike and broad-based sell-offs of the Euro and the Yen. The common currency may become a victim of the Euro zone edition of the quantitative easing. On the other hand, the Japanese Yen is expected to suffer more from lagging growth and stubbornly low inflation, partially a result of the fiscal tightening. There is an important distinction between the latter two, however.

Nippon citizens are confident in leadership of Shinzo Abe, as the latest parliamentary election results have shown. Consequently, the government is likely to keep pushing ahead with the planned measures to revive the economy and catch up to the leaders among the developed nations without any political hindrance, a salient issue in Europe.

Even though there are apparently less opposition to the QE within the ECB itself, unwillingness of politicians to assist the monetary authority to steer the economy away from the creeping deflation by implementing the often mentioned by Mario Draghi structural reforms is unlikely to prevent the gap between the business cycles in the Old and New Worlds from widening further.

What is particularly amusing is that we had a similar situation a year ago, foreseeing together with the whole market strong outperformance of the US Dollar, but also depreciation of the Euro and the Yen. Yes, the course of events in 2014 deviated from the base case scenario, mainly because of the geopolitical tensions, but that does not fully account for the distance between the forecasts and the reality. Despite the confidence of the market, there are always unknowns in the equation that can change the rules of the game.

Something we can draw from the lessons of the past is that you cannot possibly be too cautious or too conservative, at least in the context of trading and investing. The analogy might be far-fetched, but if you are climbing a mountain, it is better if your steps are maximally small and careful – one wrong move, and you may find yourself on the ground.