Dukascopy Market and Economic Research

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



The past period was all about sharp moves, as most of the indexes changed their positions abruptly and otherwise wavered around the reached levels. The main shifts took place on Thursday, when all eyes were on the Fed and its interest rate decision. The USD Index started to lose points a couple of hours before the announcement, and, after the long-awaited hike was pushed further towards the end of the year, went into a dive to the period’s absolute low of 98.5. The Pacific indexes produced the sharpest surges, but also went into the deepest dives after the press conference, yielding more than they managed to gain. Meanwhile, the krona’s gauge, which showed the week’s broadest surge as it burst above its peers with the improved GDP and unemployment data released on Friday, was gaining ground all throughout the blue area, surpassing its Australian counterpart and posting the period’s greatest gain. The only index to show virtually no reaction to Thursday’s events was the pound’s measure, which made its big move amid solid jobs report on Wednesday and kept close to the baseline during the last day of the period.



As anticipation of the FOMC meeting grew heavier, activity on the market continued to decline. The portions of elevated volatility lost some more points from the previous period’s already subdued values, with the aggregate reading standing at 6%, and the separate currencies’ measures varying from 3% to 11%. Amid the overall tranquility, even the period’s main event failed to provoke extraordinary splashes of volatility. Here, the highest peak was taken by the Aussie’s measure, but even that reached only as high as 2.3 points.



Despite the abnormal tranquility on the market and the main focus of the period being aimed at the US, the Euro’s correlation composite remained firmly within its usual boundaries. Notably, some shifts did happen in the EUR/USD components. Thus, the pair’s bond with EUR/JPY lowered its average to 0.49 from the previous week’s closer-to-long-term 0.68, while the mean correlation with EUR/CHF, on the contrary, moved closer to usual by strengthening from 0.14 to 0.32. Nevertheless, the EUR/USD-EUR/CHF component still brought a substantial amount of red into the aggregate, with its values holding heavily on the downside of the 20-day distribution.

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

As the market awaited word from the Fed, the currency indexes’ movements were reserved, with most gauges staying firmly within -/+1% interval. The only exceptions were the yen’s, the Aussie’s, and the Greenback’s measures, though even those fell out of the common bounds only briefly. The JPY Index made its major move on Tuesday morning, as the BoJ decided not to introduce new easing measures into its monetary policy. The Aussie’s gauge, in turn, reached over the 101-point line at the peak of its September 15-16 rally, backed by weaker dollar and higher commodity process, and then spiked above it amid the Fed’s conference, showing the strongest reaction to the event.

Even against the background of several tranquil weeks, volatility on the market remained extremely subdued, with the aggregate measure holding below the two-week mean for almost 90% of time. The week’s most turbulent news — the Fed’s rate decision and the FOMC statement, — managed to lift only three volatility indexes above the 2-point mark. Thus, the Aussie’s gauge reached the value of 2.54, the Kiwi’s — 2.48, and the dollar’s — 2.34. Among the period’s other turbulent events were the New Zealand disappointing GDP and strong UK labor data, both of which pushed the national currencies’ index above 1.5 points.

After spending three weeks on extremely low levels, the Greenback’s significance measure began to recover, and its average gained 0.14 points over the past period. Averages of USD/EUR components also rose, adding 0.02-0.31 points from the previous week’s values. The most notable increases were observed in the components with the Pacific currencies, where the China’s crisis caused the sharp weakening in late August, and averages fell into the negative area. During the past week, however, USD/EUR correlations with USD/AUD and USD/NZD strengthened, and their means gained 0.26 and 0.31 points, respectively.

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



Somewhat mixed performance was showed by the Canadian currency last week. Nevertheless, after trading in a volatile environment around the base line throughout the whole time period, it managed to end the week with a gain of 0.34%. Among other reported currencies, only the Euros change exceeded 1% level for the five-day period ended Tuesday of this week as it dropped by 1.05% amid expectations the ECB will be forced to expand the QE programme, if inflation fails to rebound. Safe-haven currencies continued to outperform as risk-averse sentiment returned back to markets. Thus, the Yen and Franc were up 0.69% and 0.41%, respectively.



Rich with news releases, the first three days of the period were rather turbulent for the market. In spite of that, the majority of currency pairs used to have a low percent of elevated volatility. Indeed, only USD/CAD Volatility Index spent 24% of the time above the historical level, the longest among all crosses. On the contrary, lack of statistics from Australia sent AUD/CADs reading to just 10%. All in all, the CAD elevated volatility stood at just 14%, below the markets 18% and significantly down from 60%+ showed by this currency exactly a month before.



The past week could not be divided into any distinct parts with weak and strong correlations between the Loonies crosses. The average correlation, which measures currencys strength, was fluctuating around its historical level during the whole period from Wednesday till Tuesday. However, such instability can be easily explained by a high number of different fundamental releases in course of the reported period. The most dramatic change was posted on Thursday in time of the Fed decision. Then, the US Dollar fell substantially versus the Aussie and Kiwi, thus pushing their correlations against the market and eventually creating longer tails for these components.

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




After posting the greatest gain over the previous period, the SEK Index went into a downslide and ultimately became the worst performer with a 1.5% weekly loss. Meanwhile, the dollar’s gauge, which reacted dramatically to the Fed’s interest rate decision, was recovering during the period and ended up outpacing all its peers. The AUD Index, in turn, experienced the most conspicuous and sharp movements. Starting from Tuesday, it was weakening following a stepwise pattern with drops in the beginning of European sessions on Tuesday and Friday and clear negative reaction to the Caixin manufacturing PMI, which came out at the lowest since March 2009 level. However, a recovery seen in commodities drove all associated currencies up on Thursday, and the AUD Index finished the period at the 99.0 points level instead of 98.0 mark it fell to earlier that day.



After two periods of decreasing turbulence, volatility finally picked up, and the observed measures came to exceed their past two-week averages in 20-30% of time. Nevertheless, overall levels of indexes remained subdued, with the mean values standing at around 0.86 and the period’s high barely reaching above 2.00 points. The Euro was marginally more turbulent than the market and posted the third-highest portion of elevated volatility, surpassed by its European peers — the franc’s and the pound’s gauges. The Kiwi’s measure was among the calmest throughout the week, but reached the period’s absolute high, when the currency zigzagged on late Thursday after enjoying a rally fueled by Fonterra raising its forecast payout to farmers.



The Euro’s significance measure continued the tendency of the previous week and generally moved downwards. However, due to the brief strengthening of the measure in the middle of the period, the average of the aggregate was virtually equal to the previous value, losing only 0.01 point. The same could be said for the averages of the EUR/USD components as they lost 0.03-0.09 points. The only strengthening of the bond was observed in correlations between EUR/USD and EUR/CHF, which gained 0.11 points compared to the previous values.

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



The week was very successful for the Greenback as its index steadily rose during the whole period and finished it in the best performers role, gaining from 0.33% to 2.45% against its counterparts. The Aussie, in turn, negatively reacted to another disappointing economic release of Chinese manufacturing PMI and it was the most conspicuous reaction to the economic release this week. By Thursday morning its index slid to 97.5 level, however, the commodity market recovery gave the associated currencies positive impulse and the AUD measure finished the week 1.5 points below the baseline.



After several tranquil weeks, the Greenbacks volatility picked up, and the index spent 30% of the period above its two-week average. However, the increase was mostly fueled by the dollars pairs with the European currencies. Thus, the portions of the elevated volatility of GBP/USD and EUR/USD were close to 50%, while the measures of USD/CHF and USD/SEK stood at around 40%. Some of the other components, in turn, were calmer compared with values of the previous period. As for the height of the volatility peaks, both the Greenbacks and the markets gauges failed to reach the 2-point level, and the values of the components were notably lower than the previous readings.



The dollars correlation composite seemed to have settled down around 0.3 points, sliding from the more substantial long-term levels and remaining subdued since late August. With that the dollars gauge once again kept below its peers, signaling the weakest bonds between the associated currency pairs. Meanwhile, USD/EUR components that lost their ground with introduction of negative values also continued to hover below their past readings, with the tendency most pronounced in correlations with the commodity currencies pairs USD/AUD, USD/CAD, and USD/NZD.

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



After losing value every single day except Monday during the research time period, the British Pound became the worst performing currency in the market last week. It was also joined by the Australian and Canadian dollars, which lost 0.96% and 1.29%, respectively due to pressure coming from oil prices. Moreover, all mentioned currencies were struggling amid US Dollars relative strength caused by comments from different members of the FOMC, including Chair Janet Yellen, concerning the upcoming rate increase. They confirmed that it is likely to take place in 2015. The Greenback, however, finished the period with a slight 0.11% loss.



Even though the period was unusually quiet in terms of inland fundamental releases, the Pound managed to register well-uplifted volatility in course of the whole time period. Regional spikes in the Volatility Index were taking place every day, but they were predominantly caused by news coming from different countries around the world. Therefore, the elevated volatility stood at healthy level of 45%, down slightly from average of 47% showed by the market. The threshold of 50% was reached by the EUR/GBP cross (53%) due to high fluctuations of the common currency and GBP/CHF (50%). GBP/CAD was in turn the most silent currency pair during the period as it was increasingly turbulent in just 24% of all time.



Correlations between different crosses of the UK currency held at fairly high levels in course of the reported trading period, while the composite hovered within normal range of the last few weeks. Looking at the mean correlation coefficient (0.36 points) for the five-day period from Wednesday of last week till Tuesday of this week, it was marginally higher than 0.33 points registered during the past month. Moreover, it has precisely matched the annual reading of 0.36. Components, which posted longer tails, included GBP/EUR & GBP/AUD and GBP/EUR & GBP/NZD as their average correlations even failed to exceed 0.2 points.

September Release of Dukascopy Bank Sentiment Index

Full report available here.

Summary

1. China's "Black Monday" crash on August 24 triggered a tornado which swept through the global economies and equity markets, sowing panic among investors, policy makers and ordinary people, but, as it faded, economic sentiment seemed to restore. September release of Dukascopy Bank Sentiment index revealed that all indices which show academia experts evaluation of regions short and long-term economic prospects rebounded after precipitous declines in the preceding month.
2. Nevertheless, fears continued to engross economists and analysts minds, particularly after central bankers around the world voiced concerns over the Chinese economy and the spill-over effect it might have on other economies.
3. North America enjoyed the biggest bounce-back of its sentiment indices in September, compared to other regions. The rebound came even despite the fact that the Fed decided to delay the long-anticipated interest rate hike, suggesting the US economy was not robust enough to weather recent developments.
4. Europes and Asia-Pacifics sentiment indices recovered as well, but remained at historically low levels. The regions short-term gauges remained in negative territory in September.

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



The past period was all about a standoff between the safe-haven and the commodity currencies, with the inflows and outflows of investors creating a rollercoaster for the indexes. The most sensitive one was the Kiwi’s gauge that suffered the broadest zigzags, but ultimately posted the highest weekly growth. Its Australian counterpart followed largely the same pattern, but lacked the initial momentum the Kiwi’s gauge carried over from the previous period, and thus held on lower levels, only managing to edge into the appreciation area by the end of the week. The Loonie’s index, in turn, had a smoother trajectory, sliding to the period’s low by late Tuesday and recovering to post the second-highest gain.



Continuing the tendency of the previous period’s last trading days, the Euro was rather turbulent in the beginning of the observed week. Nevertheless, overall level of elevated volatility remained roughly the same. The most notable changes occurred in the krona and were caused by the sharp drop of the Swedish trade balance and retail sales. Thus, it became the most turbulent currency in terms of both elevated volatility portion and the peaks significance.



On average, the Euro’s correlation composite remained mostly unchanged from the previous period, thought the distributions of the aggregate and the components became less grouped around the mean. Interestingly, EUR/USD correlations with the commodity currencies’ pairs shifted up, even though the currency indexes showed that the Euro’s and its peers’ movements were largely opposite. This might indicate that, despite showing different behavior across the board, the currencies have somewhat similar stance against the dollar.

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



After a confident rise in the previous week, the Greenback began to lose ground and became the second worst performer of the period, overtaking only the pound. Among the losers were also the single currency and the yen, whose indexes lost 0.47% and 0.29%, respectively. The safe-haven currencies were oscillating throughout the period and finished the week in the negative area. The counterweights to them were the commodity currencies, the Kiwi and the Loonie, whose gauges became much more successful and finished the week with 1.08% and 0.88% gain, respectively. The fluctuations of the commodity prices were driving the Aussie, too, but after the Friday’s drop the AUD Index managed to recover only to 0.01 mark.



The market’s volatility continued to pick up, with most of the observed overturbulence portions climbing above 30% and average index values scoring around 0.90. The most turbulent currency was the Swedish krona, whose gauge spent 42% of time above the two-week average and posted the mean value of 0.98. Behind it were the Euro and the franc, both with readings of 35% and 0.93. Meanwhile, the dollar stood among moderately turbulent currencies, but its index reached the period’s highest peak of 4.51 with the currencies sharp reaction to Friday’s labor data. The move was also passed to the Greenback’s peers, making all other indexes jump to their week’s highs.



The past trading week was another period of weak correlations between the USD pairs, reflected clearly in low composite’s values. The distributions of all the components with USD/EUR were notably skewed towards zero and the negative values. Moreover, considering the Monday to Thursday period, the average of the composite did not reach even the 0.2 level, while the Kiwi’s and the Aussie’s gauges were varying around the 0.72 and 0.58 levels, respectively, having the strongest bonds between their currency pairs.

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



Canadian currency was the clear best performer during the five-day period ended October 6. This currency traded firmly in green every single day from Wednesday of the previous week until Tuesday of this week. Only the New Zealand Dollar attempted to challenge the leadership status of the Loonie, when the NZD Index neared the CAD Index on the first day of October. However, the situation remained intact and the week was ended with an overall gain of around 2%. The Kiwi and Aussie followed with an advance of 1.6% and 0.94%, respectively. On the green side, only the Swedish Krona managed to gain some additional value (0.74%), while others declined.



A steady bullish trajectory of the Canadian Dollar resulted in quite low volatility readings for this currency. There were a number of important fundamental reports published throughout the period, and all of them helped the CAD Volatility Index to come back above the historical average for some periods of time. Nonetheless, the elevated volatility stood at just 28%, meaning that the Canadian Dollar was turbulent in just over a quarter of all time last week. AUD/CAD was the most volatile cross as both commodity currencies used to have stronger reaction to important market news.



Significance of the Canadian currency, calculated as an average correlation between its different crosses, showed unusual stability during the vast part of the reported period. Only Wednesday was marked with some volatility of the composite, while during other days it hovered in a narrow range between the historical average of 0.42 and the 0.55 area. Despite that, some components were showing relatively low correlations, especially those including the Euro on the one side and commodity currencies on the other side. Therefore, CAD/EUR & CAD/AUD and CAD/EUR & CAD/NZD used to have longer tails as their mean correlations were as low as 0.1 and 0.2 points, respectively.

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



As Friday’s US data hit the market, the wavering of the currency indexes was replaced by moderate trends, clearly dividing the gauges into losers and winners. The latter group was comprised of the commodity currencies’ indexes, which tumbled amid post-release risk-aversion, but jumped into recovery almost immediately. The most successful ones were the Pacific indexes, as the Kiwi’s gauge was boosted by the GDT auction, and the Aussie’s measure spurted away from the baseline with the confident RBA statement. Meanwhile, the depreciation area accommodated most of the indexes that peaked on the US weak release, as they erased their gains by late Friday and remained below the baseline till the end of the period. The greatest weekly loss was posted by the JPY Index, which moved side by side with the dollar’s gauge.



The period was relatively calm, as volatility of both the market and the single currency did not notably exceed the average historical level. The only exception was Friday, when the US nonfarm payrolls undermined the domestic currency and strongly influenced its counterparts. As a result, the market volatility measure nearly reached the 3.0 level, and the EUR Volatility Index surged to the week’s high of 3.89 points. The Loonie, the krona, and the Euro became the most turbulent currencies with 29%-30% portions of elevated volatility. The former was one of the most news-driven currencies, as its activity spikes matched the moments of Canadian PMI and housing data releases.



The Euro‘s correlation levels remained mostly unchanged from the last few weeks. Nevertheless, the aggregate and the EUR/USD components continued the tendency of the previous period, and tails of most of the distributions became even heavier. The most notable changes took place in the EUR/CHF component. Compared with the previous week, the bond between EUR/USD and EUR/CHF weakened by 0.18 point. Thus the component has dropped almost by half compared with the monthly value. The strengthening, in turn, was observed in components containing EUR/JPY, EUR/GBP and EUR/AUD. The components gained only 0.03-0.09, but their averages exceeded the long-term values.

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



Weak confidence that the Fed will raise interest rates this year as well as the increase of some commodity prices were the main drivers of the past period. Thus the Greenback fell against almost all observed currencies for the second week in a row, causing its index to lose more than 1.7%. Meanwhile, the Pacific currencies showed impressive growth. The RBA interest rate decision has lived up to the expectations and pushed the Aussie up. Thus the AUD Index became the best performer of the period (+2.47%). Recovery in the milk prices, in turn, managed the Kiwi’s gauge to rise, and it lost only 0.32% to AUD.



Turbulence on the market started to fade again, with the aggregate portion of elevated volatility losing 10% from the previous readings. The dollar, whose currency index moved on a slow downtrend throughout the period, scored below the average with 18% overtubulence. Meanwhile, the yen spent even less time above the baseline – 14% of the period, with USD/JPY posting only 3%. The most turbulent currency was the Swedish krona with the 27% of elevated volatility. The height of the volatility peaks was also rather small, and after the previous week’s spike to 4.5 caused by the US payrolls data, the Greenback’s index failed to rise even to the 2-point level.



After spiking on disappointing labor data at the end of the previous period, the dollar’s correlation composite managed to hold above the feeble levels it was stuck on for several weeks, putting its average back over the significance threshold. Notable strengthening was also observed in the USD/EUR components, where almost all distributions thinned their lower tails and shifted up. The combinations with the commodity currencies’ pairs went through the greatest changes, cutting down on the negative values that lately reigned over the bonds, and lifting their averages from zero to weakly positive numbers.

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

The new week brought distortion into the previous period’s trends, turning some of the indexes around. The most dramatic change hit the Pacific gauges, which finished Friday way above their peers, but lost their footing in Monday afternoon, and tumbled throughout Tuesday after receiving a blow from the Chinese imports numbers. In the depreciation area, the previous week’s losers started to pick up, with the USD and the JPY indexes edging to the baseline, and the Euro’s and the franc’s measures managing to cross above it. The Loonie’s gauge, which seemed to be glued to the baseline in the previous week, broke loose and nearly posted an over 1% loss, but got a boost from oil prices and rebounded sharply in Tuesday afternoon.



The past period was weakly volatile, and a large portion of turbulence came from Tuesday’s movements. The day saw the period’s highest volatility spikes, caused by the inflation data coming from Sweden and the UK. As the Swedish CPI posted unexpectedly strong numbers and the UK figures disappointed markets, the krona surged and the pound tumbled, both pushing their volatility indexes above the 2.3 points mark. The only other splashes above the 2.0 points level took place on Thursday, when the Kiwi surged and the dollar zigzagged amid the Pacific currencies’ rally, lifting their volatility measures to the period’s highs. Meanwhile, the krona and the pound also proved to be the most volatile currencies in terms of overturbulence portion, as their gauges kept above their two-week averages for almost 30% of time.



The pound’s correlation composite held around its long-term average throughout the period, and was among the three weakest gauges along with the Euro’s and the dollar’s measures. Nevertheless, there were some deviations from the usual in the GBP/EUR components, where the pair’s average correlations with GBP/USD, GBP/JPY, and GBP/CHF stood well above their semi-annual and annual readings. The bonds with the Pacific crosses, in turn, were notably weakened, with a high portion of near-zero correlations compared to somewhat shortened tails.

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



The past period was a dynamic one for the observed currencies, packed with wide moves and direction changes. The broadest downslide was suffered by the Aussie’s gauge on Tuesday. Set off by the greater-than-expected decline in Chinese imports, it ate away almost 2 points of the index’s value within the day. Another impressive plunge happened to the SEK Index, which slipped on unemployment numbers on Thursday morning and lost 1.5 points by late afternoon. The GBP Index was one more gauge to go through a sharp fall, as it lost 0.2 points in half an hour on the UK CPI data released on Tuesday. Meanwhile, the longest rally was produced by the Kiwi’s gauge, which reached its low of 99.3 points on late Tuesday and then raced to peak above the 102 mark at the end of the period.



Despite great activity observed in the currency indexes, the past period was not particularly remarkable volatility-wise. Thus, the overturbulence portions stood close to 30% and most of the average indexes’ values were below 0.85 points. Nevertheless, there were four currencies that drove their volatility measures above the 2 points line. The first such spikes happened on Tuesday, when the pound and the krona reacted sharply to unexpected numbers in national CPI releases, pushing their indexes to 2.5 and 2.4 points, respectively. The other two peaks were reached on Thursday by the Aussie’s and the dollar’s gauges. The former rose to 2.2 points as the Australian dollar zigzagged on a mix of growing consumer inflation expectation and downbeat labor data, while the latter surged to 2.4 when the Greenback jumped with the CPI release.



During the first four days of the observed period the significance measure of the Euro followed a descending pattern, as there were no economic releases from the Euro zone that could notably influence the bonds between the single currency’s pairs. Thus, the distributions of the correlations between the most traded pair and its EUR counterparts were significantly skewed towards the zero level. However, the period was associated with several notable spikes of other currencies’ significance, which followed the news from different regions. Tuesday was one of the most conspicuous days in this regard. Greater-than-expected rise of Swedish CPI and unexpectedly negative UK inflation numbers pushed the significance of the domestic currencies up, and their composites exceeded the 0.7 points level.

If you're wondering what to read during the weekend, here's an idea:

Quarterly Report: Q4 of 2015

The global economy gives no reasons for celebration. It seems the situation is even worse than three months ago, when we thought we had hit the rock bottom. Alas, further deterioration is only becoming increasingly likely.

Looking back at our previous quarterly report, the world was mostly concerned with China because of the devastating quake in the countrys equity market. As a result, the Chinese government was forced to roll back some of the reforms that were aimed at opening and integrating the economy. At that time Greece also occupied a large portion of the headlines, but do not mistake current tranquillity for absence of grounds for concern; it will surely come back to bite us, as the problem was not resolved for good. The talks between creditors and Greece only postponed a decision bound to be painful in any scenario, whichever path will be chosen in the end.

With the latest events these topics are receding into the background, but this is hardly good news, considering that reasons to be pessimistic only keep piling up. The latest readings on the US labour market turned out to be a big negative surprise. It remains to be seen whether the indicator will rebound, but whatever the case this shows a significant weakness in the US economy. We no longer guess in which month the Fed is going to hike the rate, but rather in which year.

The other regions fail to generate optimism as well. Whatever rhetoric there was in the past, the Bank of England is nowhere near monetary policy normalisation. The real United Kingdom economy is hardly improving, which is an evidence of low transmission mechanism effectiveness, and such a malaise is nowadays common among the developed countries. The banks are criticised for focusing too much on the asset prices rather than on the real economy, which in turn is on the verge of a new wave of crisis, as we see a massive exodus of funds from the emerging markets, currently the only bright spot on the globe.

At the same time, the ECB and BOJ are barely holding off from further stimulus, seeing that their previous attempts are not yielding tangible results. Perhaps it is high time officials do something about this, before the disease of barely positive inflation and subdued growth becomes chronic; however, the bankers toolbox appears to be empty. Flight to quality is thus set to persist, and arguments in favour of recovery are unlikely to appear any time soon.


Trade thoughtfully and take care,
Dukascopy Research Team

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



The past week was rich with market-moving news, and the observed currencies reacted to them with a few rather wide moves. The broadest downslide was suffered by the Aussie’s gauge, which was hit by the greater-than-expected decline in Chinese imports and lost almost 2 points within the day. Another impressive plunge happened to the SEK Index, as it slipped on unemployment numbers on Thursday morning and lost 1.5 points by late afternoon. Meanwhile, the Kiwi’s gauge enjoyed the longest rally, as it reached its low of 99.3 points on late Tuesday and then raced to peak above the 102 mark at the end of the period.



Despite all the shifts in the currency indexes, volatility on the market was borderline subdued, with most overturbulence portions below 30% and average index values around 0.85 points. Nevertheless, there were four currencies that drove their volatility measures above the 2 points line. The first such spikes happened on Tuesday, when the pound and the krona reacted sharply to unexpected numbers in national CPI releases, pushing their indexes to 2.5 and 2.4 points, respectively. The other two peaks were reached on Thursday by the Aussie’s and the dollar’s gauges, where the former rose to 2.2 points as the Australian dollar zigzagged on a mix of growing consumer inflation expectation and downbeat labor data.



During the first half of past trading week the Greenback’s significance measure was slightly varying around the significance threshold of 0.3 points, as there were no US economic releases on Monday and Tuesday, and started to appreciate only on Wednesday noon. However, Tuesday stood out for the conspicuous movements of the krona’s and the pound’s composites, which reached the week’s highs. CPIs of both economies significantly impacted the domestic currencies, and, as a result, the correlations among the SEK and the GBP instruments grew notably.

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



Markets were extremely calm and tranquil during the weekly period ended October 20. Market leadership was immediately taken by the New Zealand Dollar on Wednesday of the previous week and gains were preserved until the very end of the period. The Pound was the second-best performer as it also rallied by more than one full percentage point. On the side of gainers, the Aussie, Loonie and Franc also managed to advance in value. Meanwhile, the Swedish Krona tumbled as much as 2.54%, pushing its loss against the British currency to 3.4% on a five-day basis.



As the major Pounds changes were observed in the first two days of the researched period, volatility of this currency also showed uplifted readings during that time. All in all, turbulence remained fairly weak, which is proved by Elevated Volatility indicators for both the market and the Pound separately. The former one stayed at 25%, somewhat above the UK currencys 20%. As mentioned before, commodity-linked currencies strongly affected markets last week. Thus, GBP/CAD, GBP/AUD and GBP/NZD enjoyed the highest elevated volatility in the range between 28% and 35%. Meanwhile, the usually-tranquil EUR/GBP cross has unsurprisingly been volatile in just 15% of all time.



Currency significance was extremely low during the observed time period, meaning that the market was predominantly driven by currencies other than the Sterling. The mean correlation coefficient for this currency fell as low as 0.3 points, way below the historical average of 0.4 points. On top of that, the indicator missed all monthly, half-year and annual average correlations of 0.33, 0.37 and 0.36 points, respectively. The components have therefore had longer tails this time, with some of them dipping noticeably below zero.

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

The observed indexes had another dynamic week, packing the second half of the period with wide moves. One of the most hectic currencies was the Loonie, whose index was governed by the federal elections on Monday and Tuesday, and hit on Wednesday by the BoC statement and its downward revision of the GDP forecast, thus swaying between 98.5 and 100.0 points. The NZD Index was another active measure, as it suffered downslide on Tuesday, fueled by the DRT auction, plunged further with the Aussie’s gauge on Wednesday morning, and then went into a rapid recovery to finish the period with the second-greatest weekly gain.

The past week was rather calm, as volatility of both the market and the single currency did not notably exceed the average historical level. The only exception was Thursday, when the ECB president Draghi’s speech undermined the domestic currency and strongly influenced its counterparts. As a result, the market volatility measure nearly reached the 2.0 level, and the EUR Volatility Index surged to the week’s high of 2.85 points, the highest peak among all observed currencies. Meanwhile, the Loonie, the krona and the franc became the most turbulent currencies with 23%- 26% portions of elevated volatility.

The first four trading days of the observed period were calm for the Euro’s significance measure, as it was hovering around the level of 0.3 with no economic releases from the Euro zone to notably influence the bonds between the single currency’s pairs. Thus, the distributions of the EUR/USD components shifted down slightly, though most of their average increased compared to the previous readings. The most notable strengthening was observed in the component containing EUR/AUD, which showed the upward trend throughout the period and added 0.2 points to its average.

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

The observed period was successful for the Greenback, as its index was rising steadily during the whole week and finished it in the best performer’s position, gaining from 0.22% to 3.22% against its counterparts. Meanwhile, the single currency’s negative reaction to Mario Draghi’s speech on Thursday made it the second-worst performer of the period. The Swiss franc and the Swedish krona followed the Euro, showing 2.68% and 3.22% loss. The reaction of the Aussie and the Kiwi, in turn, was the opposite, and they finished the week with 1.49% and 1.17% gains, respectively.

The aggregate volatility on the market edged down from the previous week’s moderate readings, and only the last two days of the period were at least somewhat dynamic. Intensity-wise, thought, volatility remained on the same levels it occupied in the previous periods, and the highest peaks were capped by the 3 points line. The highest value of 2.9 points was reached by the Euro’s gauge against the background of Mario Draghi’s press conference on Thursday and the associated plunge of the single currency. The same event pushed the krona’s measure to 2.3, the period’s second-highest peak. Other splashes above the 2 points line took place on Friday. At noon, the Aussie’s and the Kiwi’s gauges jumped as the PBoC announced a rate cut, and later the Loonie’s measure followed as Canadian inflation numbers came out worse than expected.

The past week was another one for the USD composite to spend below its counterparts as there were very few releases which notably influenced it. Moreover, the bonds between the USD pairs weakened compared to the monthly figures, and the distributions of the USD/EUR correlations were skewed towards the zero. The Kiwi, in turn, remained the most significant currency, with its gauge varying around the 0.7 level. It reached the week’s high on Tuesday, just after the GDT auction ended with a drop in the milk prices. The moment was also associated with the deepest drop of the US dollar’s gauge.

Highlights of the latest Market Research release on GBP.
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Initially it was rather hard to choose, whether this report should be focused on either the British Pound or the Canadian Dollar due to busy fundamental calendar from both countries during the observed period. However, the presence of high-importance UK GDP data this week shifted our decision towards the British currency. Even though it spent all the time above the base line, the weekly gain reached only six tenths of one per cent. The Kiwi rose the most by 1.9%, in anticipation of the RBNZ rate decision on Oct 28. US Dollar surged 1.6% on the back of weaker Euro, while the Yen was up by 1%.



Among all fundamental releases from the United Kingdom, only retail sales seem to have had strong influence on volatility readings of the UK currency. Otherwise it was driven predominantly by important events from abroad as we certainly had a lot of them last week. Elevated volatility of both the market and the Sterling was equal at 24%, being that only Thursday and Friday were marked by somewhat uplifted turbulence, while during other days it has barely crossed the key mark of 1.00 point. The most volatile cross was GBP/CHF (32%), as the Franc was pricing in the possible Swiss National Banks intervention in case it will be necessary in the medium term, to prevent the national currencys appreciation.



Correlations of the Sterling were following their own way of development during the researched time period, because they were partly dependent on events happening inside the UK, while also looking at the international picture. All in all, significance of the UK currency was hammered by unexpected or low-probability events, with Chinese Central Banks rate decision and ECBs ultra-dovish language being among them. Some of components have therefore had super long tails, including the correlation between two Pounds majors with the Euro and US Dollar.