Dukascopy Market and Economic Research

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



The releases of significant economic news, which notably influenced the currencies, were concentrated in the first and the last days of the observed period. Only a few releases took place on Monday-Tuesday, which, in fact, significantly affected the market. However, the EUR index was quite changeable during these days. For example, on Tuesday it started to increase, continuing to retrace its ECB-surge and extending the previous gains, while German trade figures had a minor effect on the currency. Germany's trade surplus shrank in October, but was still higher than expected. Both exports and imports declined more than expected.



Market volatility was evolving on an ordinary pattern during the week, showing moderate turbulence during the US and Asian trading session. The most changeable and thus the most volatile was the Swedish Krona, whose index spent 57% of time above the 1.0 point level. The Yen, in turn, was the most tranquil in terms of elevated volatility portion, as the world's third-largest economy avoided technical recession and added to speculation that the BoJ will refrain from more stimulus in January. The most conspicuous surge of the market volatility was observed on Friday, when the market was awaiting Canadian employment reports, and early on Thursday morning, after the publication of extremely strong Australian employment data that wiped out the New Zealand dollar's post-RBNZ meeting gains.



The Euro’s correlation levels picked up from the previous period’s readings, with the composite’s values shifting away from the lower part of the monthly distribution. Among the EUR/USD components, the most notable overall strengthening occurred in the pair’s bonds with EUR/GBP, EUR/CHF, and EUR/CAD. EUR/CAD and EUR/GBP, along with EUR/JPY, posted the greatest average correlations with EUR/USD, with all values at or above the 0.70 points level. Moreover, EUR/USD-EUR/CAD and EUR/USD-EUR/AUD components lifted their averages notably higher than the long-term values, posting 0.10 points over the annual means.

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



The past week was slow for the dollar’s index, but some of its peers managed to move relatively far from the baseline. The biggest weekly changes were posted by the Loonie’s and the Aussie’s gauges, which were pressured by the post-OPEK downslide in commodities and spent the period on a downtrend, finishing it below the 2.5% loss line. Notably, the AUD Index had a chance at recovery on Thursday, when strong employment data pushed it to cover most of its Tuesday and Wednesday losses. However, the currency failed to catch momentum and tumbled throughout Friday. Meanwhile, its New Zealand peer, which was following its downslide in the beginning of the week, made good use of the RBZN’s rate cut and erased it losses to post a near-zero weekly change. The winners of the period were the yen’s, the franc’s, the Euro’s, and the pound’s measure, all moving on similar patterns in the second half of the week.



The dollar was notably “underturbulent” compared to the market, holding its volatility measure below the composite index for the whole past trading week. Its elevated volatility portion and average turbulence also lacked behind those of its peers, and the Euro’s readings were the only ones to signal calmer behavior. The least stable, in turn, were the Pacific currencies. The Aussie and the Kiwi kept their volatility indexes above the historical average for more than 50% of time and reached the week’s highs of 6.66 and 4.88, respectively. Such activity reflected the uneven surge of the currencies after the RBNZ’s rate cut and the release of strong Australian employment data.



The Greenback’s significance measure started the period well above its average level. However, from there the composite showed a downward trend, losing more than 0.35 points by the end of the week. The sharp decline was caused by the weakening of the components with USD/AUD, USD/CAD, and USD/NZD. The lowering of the commodities prices on Tuesday and Friday led to the fall of the components, putting them in the negative area. Their averages, in turn, lost more than 0.25 points. This resulted in a reduction in the average of the dollar’s aggregate, and it declined by 0.12 points.

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



The Pound traded generally above the main baseline for the most of the period ended December 15. At the same time, some weakness provided by bearish market participants at the end of the five-day period resulted in a decline of the GBP Index. Thus, it used to finish the week with literally no change in value. Similar to the UK currency, the Swiss Franc finished the week with a loss of only one basis point. The biggest losers were CAD and AUD, as they failed to cope with declining oil prices. Another commodity currency, the Kiwi, was surprisingly the best weekly performer, which rallied by 1.74% in five days. Despite the Reserve Bank of New Zealand delivering a so-called "hawkish cut" to the key interest rate, economists see an improvement in terms of NZ fundamentals, which should further underpin the local currency in the nearest future.



During all days of the researched period except Monday (December 14) we have got a number of important fundamentals from different countries. In particular, the week was busy for central bank events, with the Bank of England, RBNZ and the Swiss National Bank all releasing their monetary policy decisions. Joined by other statistics across the board, the Pound became highly volatile in course of the period. Elevated volatility reading reached 58% and matched the market average. The most volatile cross was GBP/JPY, which was turbulent in 77% of all time. The Yen was the second-best performing currency last week, as investors attempted to keep their funds in safe assets in the run up to the Fed rate decision.



Correlations among different currency pairs of the Sterling were generally trending higher during the observed period ended December 15. While last week was full of important events, it used to drive different GBP crosses in various directions. At the same time, silent Monday and pre-Fed Tuesday provided the UK currency with higher significance when the composite reached weekly highs. Some interesting components to mention included all commodity-linked currencies. The oil price rout, which was taking place throughout the whole period, was in parallel pushing NZD, CAD and AUD down. These components registered extended tails and mean correlation coefficients of only 0.12-0.18.

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



The Euro index was rather stable past week, and even spent the most of the time above the baseline. However on Wednesday, the single European currency was induced by the Federal Reserve's rate hike, as investors digested details of the subsequent press conference, pushing the euro closer to the $1.10 level. The dollar, which showed the downward trend, on the contrary, began to grow stronger and became the leader of the period (+1.02%). The much less fortunate were the pound, the Aussie, and the Canadian Dollar, whose indexes formed the top 3 losers and dropped by 0.63, 1.03 and 1.27 points, respectively.



The past trading days injected the market with a solid amount of volatility, raising most of the currencies’ overturbulence portion above 40%. The Euro was the most tranquil currency with the reading of 31%, while the absolute leader was the yen, which held its index above the historical average for more than 55% of time. The highest peak, in turn, was reached by the Greenback’s gauge, as it spiked to 3.6 points on Wednesday, amid the Federal Reserve meeting. Meanwhile, the next day the dollar was trading close to two-week highs after the Federal Reserve raised US interest rates for the first time in a almost a decade.



The Euro’s significance measure posted stabile negative trend, with the lower readings at the end of the observed period which were affected greatly by the Fed monetary policy decision. The reaction was well seen in the EUR/USD-EUR/AUD correlation distribution, which slid down to its lowest long-term values. Among other EUR/USD components, there was virtually no shifts neither from the previous readings nor from the long-term records. During the past period, the Euro’s correlation composite was mostly governed by the single currency’s morning movements, pushing the measure up on Friday and Wednesday.

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



The past week was one of the most anticipated week’s of the year, as the Fed finally delivered its first rate hike since 2006. However, the US policymaker was not the only one to make announcements, and the long-awaited Wednesday did not hold the sharpest moves. Instead, the greatest surges were shown by the krona’s and the yen’s gauges, both in response to their national banks’ releases. The SEK Index jumped 0.8 points as the Riksbank decided against additional stimulus on Tuesday, while the yen’s measure went into a half-day-long rally after the BoJ set on supplementary measures instead of a major policy move on Friday.



For the third week in a row the Volatility Indexes of the market and the Greenback were quite turbulent and spent about 40% of the period above the historical level. For the dollar the week was also marked by the highest volatility spike compared to its peers. However, in terms of elevated volatility, the undisputed leaders were the yen and the British pound, which spent a half of the past week above the 1-point line. The Euro, in turn, was the most tranquil currency of the period and the portion of elevated volatility of the index was even less than 30%.



The dollar’s correlation composite retained its weak position till Wednesday, when the boost from the Greenback’s reaction to the Fed’s rate decision pushed the measure towards the high 0.70 level. The post-Fed strength also shifted up the USD/EUR components’ distributions, however, the weekly average correlation levels did not grow significantly because the start of the week was associated with low and even negative values for the Pacific components, while the currencies themselves kept on being the major market drivers.

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



The Sterling was a clear under-performer during the previous trading period ended Tuesday, December 22. This currency was pressured by the bears, even though the fundamental front was much more optimistic than pessimistic. The GBP Index spent all of the periods time below the major base line, meaning this component was losing value every single day. At the same time, until Tuesday the worst weekly performer was the Canadian Dollar; however, disappointing UK fundamentals on Tuesday pushed the Pound Index below the CAD Index. Therefore, the aggregate 5-day spread between two currencies reached 11 basis points by Tuesday evening.



Given that the beginning of this Christmas week was very poor on any fundamentals, especially on Monday, the vast part of volatility was observed during three days from Wednesday to Friday. Without any doubt, the highest spike was seen on Wednesday when the Federal Reserve made a historical interest rate decision. It hiked the target range for the Federal funds rate by 25 basis points to 0.25-0.5%. The decision was, however, largely expected and partly priced into markets. However, Janet Yellens press conference revealed that the Fed is on course to raise interest rates four times in 2016. While the market assumes only two hikes next year, this divergence caused most of the last weeks turbulence.



Significance of the UK currency was relatively high last week, and it was reflected in the readings for the mean correlations coefficient. On average, the correlation amounted to 0.43 points during the researched period. On the basis of the last 20 days, the mean correlation was 0.41 points, while falling to just 0.37 and 0.36 points on six-month and yearly time frames, respectively. The best-correlated component included the Swiss Franc, while those with commodity-linked currencies were sometimes posting correlations strongly below zero. The longest tail, however, was showed by the GBP/EUR & GBP/USD component amid the Feds event, which caused large volatility on Wednesday.

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 Swedish retail sales pushed the SEK index up on Tuesday, ultimately making it the best performer of the period with a 1.14% increase. Meanwhile, the Pacific currencies retained an upward trend and stably held their leading positions, gaining about 0.70% over the week. The Greenback’s gauge, on the other hand, was gradually decreasing through the whole period and ended the week with the worst result, losing 1.05 points. The short week was also hard on the pound, as the unexpectedly high UK public sector net borrowing forced the GBP Index to fall, costing it 1.40% on Tuesday.

The holiday week saw a notable decline in the trading activity, with the portion of elevated market volatility on an incredibly low level of 3%. Despite the Greenback’s movements in the beginning of the week, the USD Volatility Index only managed to exceed the historical average twice and for very brief moments, resulting in reduction of the portion of overturbulence to 1%. Among the USD components, EUR/USD and AUD/SUD were the calmest, while GBP/USD, USD/CAD, and USD/SEK demonstrated a somewhat higher degree of activity, pushing their portions of elevated volatility above the 10% mark.

The dollar’s significance measure entered the week sliding down from the rate hike fuelled surge, and it proved to set the mood for the short holiday period. Moreover, the uneventful end of the week brought negative values into the dollar’s correlations, bringing the composite below the 0.10 points mark at the period’s low and leaving its average below the significance threshold. Some major shifts were also observed among the USD/EUR components, where the pair’s average correlation with USD/CAD slipped into negative area, and the usually moderately strong bond with USD/GBP produces values close to zero. The only strengthening was observed in the USD/EUR-USD/CHF component, whose distribution notably thinned its lower tail and average value stood above the long-term readings at 0.80.

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



Another short week saw little action in the economic calendar, but fairly much activity in the currency rates, with the movements exaggerated by thin pre-holiday volumes. December 29 was the second most active day, with many sharp changes in the currency indexes. Thus, the Loonie’s gauge surged with the recovery of oil prices, joined in the direction by its Pacific commodity counterparts. The pound, on the other hand, went through the European session on an across-the-board weakening, pushing the GBP Index below its peers. Other European indexes held steady in the morning, but dipped with the opening of the New York session. Meanwhile, the yen and the dollar remained largely indifferent to the commotion. The most volatile, in turn, was the last day of the year. It saw major downslides in GBP and CHF Indexes, which became the week’s worst performers, and upsurges in the Aussie’s, Loonie’s, the yen’s, and the dollar’s measures.



The Greenback’s volatility has slightly recovered after the Christmas week’s calm, and the index spent 13% of time above the historical level. However, despite the increase of the dollar’s activity, it became one of the most tranquil currencies compared with the peers. The European currencies, in turn, showed greater turbulence. Thus the portion of the elevated volatility of the krona was 25%, while the pound’s and the franc’s measures spent 22% above the 1-point level. The only majors that proved to be more tranquil than the Greenback were Asia-Pacific currencies, whose readings ranged from 5% to 10%.



The short last trading week of 2015 was marked with weak correlations between the USD instruments. Comparing to the long-term readings the distributions of all the EUR/USD components were notably skewed towards the insignificant zero-level. Thus the Greenback shared the weakest position with the yen, the composite of which did not exceed even the 0.4 level. The Loonie, which strikingly reacted to oil price appreciation, became the main market driving power as its significance measures was varying around relatively high 0.6 points level.

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



During the period, which included a long New Year holiday weekend, the Sterling was developing in a mixed environment. It, however, managed to end the five-day period on a positive note, while gaining around three tenths of one percent. The undoubted leader of the week was Japanese Yen, which appreciated by 2.7% with a considerable rally on Monday and Tuesday. The safe-haven currency benefited from the worst start of global equity trading since 1999, owing to worries that Chinese manufacturing sector is weak and will remain fragile in the foreseeable future. In the meantime, the gap between the US Dollar and UK Pound reached one full percentage point, as the Greenback used to be another safe asset and notable gainer from weak performance of the stock market in Asia.



Being unusual for such a short working week, GBP volatility was quite high during five trading days through January 5. Despite a questionable spike of turbulence in the evening on Thursday, which occurred mainly because of spot price differences at market closure time in the New Years night, the aggregate volatility managed to show solid numbers throughout other days of the researched period. Elevated volatility of both the Sterling and whole market stood at 44%. The most volatile component was GBP/JPY, partly due to strong gains of the Yen on Monday and Tuesday. Meanwhile, commodity-linked currencies were resilient to oil price fluctuations last week, being that volatility of such crosses as GBP/AUD and GBP/NZD used to be one of the smallest at only 33-36%.



Correlations of different currency pairs of the Pound, which altogether make up a significance gauge for the UK currency, can be easily divided into two periodsthe days before and after New Year holidays. The lack of volatility was positively reflected in correlations on January 30-31. The opposite case was in place during the first days of this week. A stock market crash in China, unstable oil prices and a busy economic calendar in Europe and US provided the Sterling with more active movement, which was different for every single component and led to deteriorating unanimity.

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




After rather flat pre-Christmas week for the single European currency, during January 4-7 time period the Euro remained rather calm. However, on Monday and on Thursday, volatility was extreme again as the Euro has been erasing previous losses, pushing above the important $1.08 mark. During the whole observed period the Euro traded just above the baseline, except Tuesday when it slid below the zero level as the new year's sell-off continued, pushing the Euro to one-month lows. Earlier in the session, inflation in the Euro zone measured by CPI remained at 0.2% year-on-year, while the core gauge stayed at 0.9%.




Volatility of the Euro used to hover around the normal level for the vast part of the period, after the calm Christmas week, thus, even the minor economic data announcements could provoke huge volatility. Some local spikes in turbulence were observed on Monday, Wednesday and mainly on Thursday, along with different economic events across all regions, which drove the single currency in different directions, thus creating uplifted activity on the market. On Monday, a raft of fresh data from the Euro zone showed an economy very much in recovery, with all countries remaining in expansionary territory.




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 at all time except January 7 and had a low average value. As usually, the correlation between the Euro pairs were relatively low and this week; however, only at the very end of the period correlations spiked up to 0.60.

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



During the past week the market was mostly driven by the Chinese economic news. Renewed worries about the world's second largest economy sent traders to traditional low-risk yen and Swiss franc. As a result, the yen’s index finished the period with a significant gain of 4%. Meanwhile, the situation hurt the Pacific currencies, whose economies export heavily to China. Thus, the Aussie and the Kiwi turned out to be the absolute losers with 4% depreciation of their indexes. The rest of the currency indexes remained in relatively narrow range of 98.5-102 points.



After two largely uneventful, tranquil end-of-the-year periods, the market’s turbulence picked up in the first week of 2016. As the holiday weeks produced low benchmark volatility levels, the observed indexes spent most of the days above the 1-point line, resulting in impressing elevated volatility readings. However, their averages lay in a moderate range of 1.1-1.5 points, suggesting that turbulence was still not particularly strong. The most volatile were the Asia-Pacific currencies, which also posted the most remarkable currency indexes’ changes. They were also the ones responsible for the aggregate index’s highest spike, as their moves on early Friday pushed the DBVI to the 2.8 mark.



The past period was marked by the notable weakening of the dollar’s correlations. Despite the fact that the composite started the period at a rather low level of 0.21, it managed to fall even and lose 0.11 points by the end of the week. Nevertheless, its average value remained almost unchanged compared to the previous readings. Meanwhile, the USD/EUR correlations with USD/GBP, USD/CHF, and USD/JPY gained 0.28, 0.17, and 0.16 points, respectively. The pair’s bonds with the Pacific currencies, in turn, showed an extreme weakening, losing about 0.3 points and dropping into the negative area.

December Release of Dukascopy Bank Sentiment Index Report
Full research available here.

 

1. 2015 was a tough year for the global economy amid geopolitical risks and migration crisis as well as slowdown in emerging markets, particularly in China. However, there was also a bright spot, with the US economy strengthening and the Fed feeling confident that the world’s number one economy could withstand the first interest rate hike in almost a decade.
2. In the final month of the year, professors’ confidence waned, as no region saw an uptick in the economic sentiment index in December.
3. Europe’s short-term sentiment index remained flat, whereas the three-year mood indicator fell, despite the ECB’s recent move. The central bank decided to embark on more stimulus measures to fight stubbornly low inflation. The central bank lowered the interest rate of the deposit facility by 10 basis points to –0.30%. In addition to that, the ECB extended its asset-purchase programme until the end of March 2017, or beyond, if necessity arises.
4. The same picture was seen in professors’ assessment of the North American economic potential, despite the Fed optimism about the world’s number one economy and historic decision to hike interest rates.
5. Academia experts remained concerned about the Asian-Pacific region, with China’s economic slowdown being reportedly the source of economists’ worries.

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



Canadian Dollar was among the worst performing currencies during the last five-day period, as it used to depreciate strongly along with other commodity-related currencies. Accompanied by Australian and New Zealand dollars, they all dipped by 1.5-to-2% from Wednesday of the last week. Especially heavy downward impetus was created by oil prices, as they plunged as low as $30 a barrel and have already briefly tested the area below this mark. Another bearish performer was the British Pound, which touched the lowest level since 2010 against the US Dollar amid negative impact for the UK coming from weaker China and slowly-growing Euro zone.



Unusually for most of the previous periods, this time the Canadian currency was heavily volatile throughout all days of the observed time period. As seen from the main chart for volatility, movements of this particular currency coincided with the market in the majority of all cases, meaning global events used to have much sharper impact on CAD than fundamental events from inland Canada. At the same time, it should be noted that the total number of data releases from this country has greatly overshot the number of publications for such regions as Australia, New Zealand, Japan and the UK. Due to high activity, the elevated volatility reading for CAD and the market average stood at 73% and 78%, respectively. The most volatile cross was CAD/JPY, which used to be turbulent in 87% of all time during the past five days. The key safe-haven was substantially diverging from the Canadian Dollar, which was hammered by slumping oil prices.



Correlations of the researched currency were not generally influenced by red readings posted by some particular components that in most of the cases included Australian and Kiwi dollars. This is because all components with commodity-linked currencies had a tendency to develop differently from the market, by getting massive pressure from tumbling energy prices. Despite showing healthy correlations for the majority of components, which provided the composite with a more or less stable development last week, the mean correlation coefficient stood at only 0.4 points during the period, down from a monthly average of 0.52 points.

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



During the previous days, the observed currencies managed to go through some notable ups and downs. The yen became one of the best performer of the period with a 0.59% increase during the Asian session, on Friday, after the Chinese government fixed a slightly stronger yuan mid-point. Also, Chinese trade figures had great impact on Australian dollar, as data came with a much better numbers than markets anticipated, raising the outlook for demand from Australia's biggest trade partner, however, the overall trend for the aussie remains bearish. The Kiwi’s gauge, on the other hand, was gradually decreasing through the whole period and ended the week with the worst result, losing 1.38 points, after oil prices fell to a 12-year low, while Chinese stock markets also posted notables looses.



The period was enormously volatile for both the market and the single currency. Almost all Euro pairs lifted their elevated volatility portions above 50%, with the measure for EUR/AUD reaching almost 95%. Of course, it can be easily explained by the fact that during previous several weeks the whole market was strongly affected by Chinese equity market volatility. Chinese policy makers, rather than dampen volatility, decided to increase it, as investors rushed to sell for fear of being locked into positions in frozen markets. In addition, the period was full with influential news on different economies.



The week was relatively dynamic for the single currency, with several events which noticeably influenced its value and forced the correlations of the Euro crosses to rise. The correlations during the period also were strong, and average values have reached even the 0.6 level. Compared to long-term values, mean correlations of the all components divided almost equally in their gains and looses while EUR/NZD and EUR/SEK advanced the most compared to the previous 20 days, by 0.21 points.

New issue of our Quarterly Report is here!

Supposedly, no one would argue that an economy, especially a global one, is far too complex far beyond anyones full comprehension. It resembles a bunch of gears with varying diameter and number of teeth, connected together in one enormous contraption. Meanwhile, the policymakers are the ones who take part in the mechanical reasoning test and turn the first wheel to guess direction and speed of the last one, the wheel of economic growth. The problem is that for the time being they seem to be unable to figure this one out. So once again, the conclusion is that we have to be patient and we will have to wait a little more.

There was an excessive amount of pessimism in our report last quarter, and to say the truth, it has not gotten noticeably better since then. It is a pity, but we had to reject a picture with a vast green valley and clear blue sky for the title page of this issue; instead, we decided go with the one you just saw. Everything seems to be crammed, everything seems to be blocking our view, and hardly anyone has a full grasp of the current situation, so it made a lot more sense.

It does appear that the United States are weathering the adverse environment successfully, but we have to admit that one country, however large in terms of economic output, will not be able to drag the whole world along with it. There has to be some positive reinforcement, and there is none. The potential engine of global recovery, China, is busy dealing with the stock rout and low business confidence, and it is highly unlikely to meet the expectations. Nobody seems to believe now the possibility of China bailing out the Eurozone, something that was very common in the news several years ago. It might be a bad habit to start the new year with this much gloom, but there is still no break in the clouds. And even if there is one, it might not last long, given how unstable the clouds are.

Do not get us wrong, it is not all black, but the there is little reason for optimism. Still, it is possible to find some positives in this, especially for traders, who depend not so much on the well-being of the economy, but are a lot more flexible in this regard. The unstoppable bearish trend in oil prices and slowdown in China create unique possibilities. Volatility is not only elevated at the moment, but new great opportunities now present themselves during the Asian trading hours, too. Use them well.

Trade thoughtfully and take care,
Dukascopy Research Team

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



During the week the Greenback was one of the most stable currencies as it was steadily appreciating while its counterparts experienced significant ups and downs. Just like during the first January’s trading week, the Australian dollar coupled with its regional peer Kiwi posted the most conspicuous rate changes. The currency indexes started the week with a slight recovery after the previous week’s 4% loss. However, on Wednesday, coupled with another commodity currency – the Loonie – the indexes slumped by 1%. Less pessimistic than expected Australian employment data made the domestic currency to appreciate on Thursday. Nevertheless, the effect was short-lived, and another drop of oil prices was followed by even more significant depreciation of the associated currencies. As a result, the Canadian dollar finished the period with the 2% loss. Meanwhile, the safe-haven yen gained 2% in one day and became the best performer of the week.



For a second week in a row portion of elevated market volatility reached the extremely high 70% level. However, the dollar was notably “underturbulent” compared to the market, holding its volatility measure below the composite index for the whole past trading week. Its elevated volatility portion and average turbulence also lacked behind all its peers. The least stable, in turn, were the Asia-Pacific currencies. The Aussie and the yen kept their volatility indexes above the historical average for 80% of time. Such activity reflected the unstable situation on the commodity and stock markets.



Absence of the influential news releases on the US dollar as well as the overall economic situation on commodity and stock markets was reflected in extremely low USD composite’s values. The notable weakening of the bonds between commodity currencies and safe-haven currencies was observed. Thus USD/EUR correlations with USD/AUD, USD/CAD and USD/ NZD held in negative area and averages of these components lost about 0.5 points compared with the long-term values. As a result, the average value of the composite has been cut almost in half compared to the monthly value.

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



The market was again divided into two groups of weekly gainers and losers. As the equity market rout continued earlier during the last days of the previous week, we observed all risky currencies dropping down. Among them, Australian and Canadian dollars were traditionally following sliding oil prices that tested the area below $28 per barrel. AUD and CAD were down by 0.84% and 1.65%, respectively. New Zealand Dollar could end the period on a more optimistic note, but tumbling dairy prices (main industry in New Zealand) sent this currency to the South by more than 2% on a five-day basis.



Being that global stock and commodity markets remained largely turbulent throughout the whole period, their activity was transferred to the FX market as well. Therefore, elevated volatility held above 50% for the Pound and for the market, namely at 59% and 58%, respectively. Even though last Wednesday we were looking at the Canadian Dollar, it did not change the fact that the most volatile cross still includes the Japanese Yen for a second consecutive week. GBP/JPY was volatile in 68% of all time, with Pound/Aussie following at 62%. Mean Volatility Index has therefore surged up to 1.12 points, supporting the case of unstable market conditions during the period.



Significance of the Sterling has just barely exceeded its medium and long-term averages during the five-day period ended January 19. In particular, we see that the main trigger for that was development that took place on Tuesday when the composite experienced a healthy increase. Mean correlation coefficient stood at 0.38 points last week, up only two basis points from an annual average of 0.36. Some specific currency pairs, especially those including commodity-related components, even posted negative periods correlations. They ranged from 0.16 points for EUR/GBP and GBP/AUD, to 0.03 points for EUR/GBP with GBP/NZD.

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



Euro was one of the best performers last week. It came virtually at par with Swiss franc and Greenback and was surpassed only by the Yen. All of the other currency indices lagged at least 1% behind the Euro. From the very beginning Euro index showed strong commitment to be amongst the best performers in the period. It ended Friday 1.1% above the base while losing additional points the next day. On Tuesday the latest inflation data from the Euro zone failed to set direction for the pair and it remained at it lows of the period. Annual euro area inflation remained stuck at mini-growth in December.




Levels of volatility remain rather moderate. Elevated volatility (above the usual (long term value; 1.0 in the index scale) is being observed in 55%, or more, of the time in a clear majority of the cases (market and individual currency pairs). In addition, average volatility is at 92 to 131% of the long term level. Highlight of the period, in terms of volatility, as anticipated, was observed on Thursday. We saw three peaks in market volatility (2.3, 2.1 and 4 times higher than the usual level). First one is attributable to the poor US retail sales. The second one, after the publication of the US inflation report, even though it missed expectations.




Significance of the Euro, measured as an average correlation between various Euro crosses, was mixed in the period of analysis. The gauge started the period at 0.61 and ended it at 0.68. The change in the gauge in the period was pretty surprised with one major recovery at the end of the week. Average correlation was steadily decreasing until Thursday affected by economic announcements from the different regions. As surveyed, the ECB decided to maintain the lending rate at a record low level of 0.05%, along with the deposit rate remaining at -0.30%.

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



The active stance the observed currencies have taken in the beginning of the year continued to reign over the market, and the strength indexes once again produced a wide range of weekly change. The period’s leader was the Loonie, whose gauge posted a 3% gain, paring the previous week’s loses with an impetuous rally. Starting with the BoC’s decision to not cut the rate on Wednesday and finding support in the bounce of the oil prices further in the week, the upsurge swiftly took the CAD Index above its peers and put it more than 1% ahead of the closest counterpart by the end of the period. The said counterpart was the Aussie’s gauge, which had a bumpy start of the week after the January 15 downslide, but picked up alongside its Canadian counterpart. Meanwhile, the main losers of the period were the EUR, the CHF, and the JPY Indexes, which fell sharply on Thursday and remained under the downward pressure in the following day.



Against the background of extremely turbulent first weeks of the year the past week seemed almost normal, as average of the volatility measure was very close to 1 as well as portion of elevated volatility close to 50%. Thus, turbulence of the week was in line with that of the previous two, which means that the currency market stayed under pressure of oil price movements as well as worries about the Chinese economic situation. Just like previously, the Asia-Pacific currencies remained the most volatile with more than 55% elevated volatility portions. Meanwhile, there were two more currencies – the Loonie and the Euro – which conspicuously reacted to domestic economic releases.



The period of the negative relationships between the Greenback’s pairs has continued for the third week in a row. The commodity market still aroused a dissonance in the currencies’ movements. Compared with the previous week, the average of the US dollar’s composite lost 0.04 points. For most of the USD/EUR components the past period also was unsuccessful, and the averages decreased by 0.06-0.22 points. Meanwhile, the averages of the components containing the Pacific currencies and the Loonie gained 0.04-0.07 points.

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



The total number of economic events was declining every day throughout the period ended Jan 26. Despite that, currency markets were kept in volatile mode due to other factors. They included continuous instability in global equity markets, even though we have seen some improvement of the situation after the ECB and the PBOC said they will provide more support. Additionally, oil prices are still hovering near $30 a barrel. The latter fact, however, failed to derail commodity-linked crosses including the Canadian Dollar. Joined by the Aussie and Kiwi, they managed to become the best performers during the previous week and gains were held above one percent.



Wednesday of the previous is clearly showing that Canadian events used to have great deal influence on the domestic currency. Indeed, the Bank of Canadas moderately-surprising decision created the most visible part of daily action. As we have mentioned before, the number of daily events had been falling every day and this fact was reflected in volatility of both the Canadian Dollar and the market. Tranquil Monday and Tuesday affected the overall weekly readings for elevated volatility, which stood at only 36% and 33% for CAD and market, respectively. Compared to our previous report on this currency, there has been a clear slump from 70-80% seen two weeks ago.



Significance of the Canadian currency exceeded all possible short and long-term average indicators last week, helped by mainly unanimous and united market reactions of various CAD crosses to fundamental events from Canada and abroad. As seen from the mean correlation coefficient table, the average correlation between currency pairs stood at 0.58 points, well above the 20-day average of 0.51 and annual mean of just 0.43 points. With EUR/CAD the most correlated currency pairs normally include US Dollar, Japanese Yen and Swiss Franc due to the safe haven status of these currencies and the Euro.