Market Research

Market overview for April 15 - 19, 2019: The Yen's index becomes the main gainer after three weeks of losses. The USD Index returns its YTD readings to the positive area, while the Swiss Franc's gauge becomes the worst performer on the basis. Median volatility stands on record lows, but the NZ CPI becomes the most turbulent event since the March 27 RBNZ statement.

Currency Indexes (CI)

The past week saw some stratification in the observed currency indexes, with half the gauges spending most of the period moving sideways within a narrow ±0.30% range, while other showed some directional movement and ended up with more palpable weekly changes. Here the main gainers were the Yen's and the US Dollar's measures, while the Kiwi's and the Swiss Franc's indexes posted losses.

The NZ Dollar's measure also stood out amid the relative tranquillity by suffering a major 1.09 pp drop after Tuesday CPI miss.

North America: USD, CAD

After reporting a modest loss in the previous period, the US Dollar's index turned back to posting weekly gains, finishing the week just above the +0.60% line, on par with its Japanese peer. The result made the measure the third-best on the MTD basis, and allowed it another chance at testing the positive area with its YTD change.

The USD Index spent the week changing in line with the Yen's gauge, and the two measures mostly acted as counterweights to their peers' moves. Thus the indexes remained subdued in the first half of the period, with the uneven performance of their risky counterparts holding them near the +0.20% line. On Thursday, however, the Greenback's and the Yen's measures enjoyed a breakthrough as the Euro's fall allowed them to rally above the +0.50% mark, and afterwards held above the line till the end of the period.

The Canadian Dollar's index spent its fourth consecutive positive period and posted a modest below-0.20% gain for the third week in a row. That allowed the measure to push its YTD change further above the +2.80% line, retaining its position as the second-best performer after the Pound's gauge.

The CAD Index started the week with a 0.49 pp fall prompted by the release of the BoC business outlook survey, which showed the business sentiment index drop from strongly positive 2.2 mark in winter to slightly negative -0.6 value in spring. With that move the Loonie's gauge found itself near the -0.20% line and remained glued to it until Tuesday European session, when it started to steadily erase its losses.

The recovery came to its peak on Wednesday, after the data release showed the Canadian inflation numbers come in in line with expectation and trade deficit narrow. The CAD Index added 0.32 pp and touched the +0.50% line, but then promptly slid to the +0.20% line and spent the rest of the week moving sideways along the line.

Europe: EUR, GBP, CHF

The Euro's index started off near the baseline in the positive area and seemed to be posed to spend the whole period on the same level, but was hit by a bunch of underwhelming data released on Thursday. The EUR Index lost 0.16 pp as German flash manufacturing PMI came in below forecasts, failing to show the expected uptick back towards the 50.0-point threshold, and then dropped by another 0.14 pp when the Euro zone services industry measure was reported to underperform as well. Thus the EUR Index found itself below the baseline and proceeded to try and fail to cross back into the positive area until the end of the period, ultimately posting a near-zero change. Nevertheless, technically the past week was the third-consecutive positive period for the single currency's gauge.

Meanwhile, as the Brexit drama lost steam with the "flextension" negotiated at the previous period's EU27 summit, the Pound's index remained relatively flat and ended the week with a modest loss of 0.24%. The result erased a fraction of the measure's YTD gains, bringing its reading closer to that of its Canadian peer, but still was not big enough to push the GBP Index off the leader's position.

The Swiss Franc's spent its third consecutive negative period, with the reported losses growing with each week. During the past period, the measure was steadily sliding south, and ended up becoming the main loser and posting its worst result since the beginning of the year. On the YTD basis, the CHF Index dropped its reading below the -3.00% mark, thus taking the worst performer's title from its Japanese peer.

Asia-Pacific: JPY, AUD, NZD

The Yen's index became the period's best performer, beating its US peer by only 0.04 pp and posting its first gain after three weeks of losses. The result allowed the JPY Index to cut its YTD decline above the -2.00% line and thus pass the worst performer's position over to its Swiss counterpart.

The Australian Dollar's index posted a weekly gain for the fourth period in row, sharing the third-best performer's position with its Canadian counterpart.

The AUD Index's movements throughout the week were also somewhat similar to those of the Loonie's measure. The Aussie's gauge started out feebly and fell to the -0.40% line on early Tuesday, the RBA April 2 meeting minutes pointed out that "the likelihood of a near-term rise in rates was low" due to subdued inflation, and that a cut would be "appropriate" if inflation remained low and unemployment showed signs of rising. The AUD Index lost 0.26 pp in the hour following the release, but managed to fully erase the losses later in the day, taking advantage of improved risk sentiment.

On Wednesday morning, the AUD Index added 0.43 pp and peaked to the +0.50% mark after the release of strong Chinese data, but failed to cross the line in further trading. Later, the measure flattened out alongside its Canadian peer to finish the week with a minor gain.

Meanwhile, the New Zealand Dollar's index finished another period on the other side of the baseline compared to its neighbour. The Kiwi's gauge posted a moderate 0.67% loss and became the week's second-worst performer, dropping its YTD reading to its lowest level since January 18.

The NZD Index started the week on a strong footing, but suffered a dramatic 1.09 pp fall on late Tuesday, when the New Zealand CPI disappointed expectations on both QoQ and YoY bases. Afterwards, the measure swayed around the -0.50% line throughout Wednesday, but failed to overcome the level, dropping below the mark in Thursday trading and flattening out alongside the Swiss Franc's gauge.

Volatility

Observed median volatility levels shifted further down from the record low levels recorder in the previous period, with most readings standing at or below the 0.022% mark and nowhere near the 0.030% threshold. The Euro, the US Dollar, and the Swiss Franc reported the values of 0.018-0.019%, marking the first time the volatility medians came in below the 0.020% mark.

Most of the volatility maxima also remained subdued. The only exceptions were the peak that marked the NZ CPI release, which proved to be the most turbulent event since the release of RBNZ statement on March 27, and the peak formed after the BoC business outlook survey release, which reached the highest level for the Loonie's measure since the January 2 "flash crash".

North America: USD, CAD

Monday's business outlook survey release caused the CAD Index to suffer the week's second-biggest 10-minute drop of 0.49 pp, and thus fuelled the period's second-highest volatility peak. The Loonie's aggregate turbulence measure jumped to the 0.120% line for the first time since February 8 net change in employment release, with AUD/CAD and NZD/CAD being the only pairs to post values below the mark.

Wednesday data release, in turn, prompted a 0.32 pp jump in the Canadian Dollar's gauge, and its aggregate volatility rose to 0.082%. Here the lowest readings were reported by AUD/CAD, CAD/CHF, and NZD/CAD.

Asia-Pacific: JPY, AUD, NZD

The NZD Index's massive 1.09 pp tumble after the CPI data release put the currency's volatility to week's absolute maximum and the highest level since the 0.332% peak fuelled by the March 27 RBNZ statement. Here all of the Kiwi pairs posted readings greater than 0.220%, with AUD/NZD being the only one to report a below-0.260% value.

A few hours after the NZD Index's drop, its Australian peer jumped by 0.27 pp after the release of strong Chinese data. This prompted a 0.093% volatility peak that was largely overshadowed by the residual Kiwi overturbulence. Nevertheless, that was the second-highest peak of period.

Currency Pair Correlations

The past week's most changed correlations marked the lessening of the Pound's influence on the development of its pairs. Thus GBP/CHF correlations with GBP/USD and GBP/JPY shifted away from the elevated levels observed both in monthly and half-yearly distributions, with their weekly values holding mostly below the medium- and long-term medians. Meanwhile, correlations between GBP/USD and EUR/USD edged up from the largely insignificant monthly readings, lifting their weekly median closer to the o.50-point threshold and the six month level.

Correlations between EUR/USD and USD/CHF, in turn, showed a weakening from the normally solid negative levels, with a big part of their weekly values lying in the insignificant area.

The most interesting changes were observed in the bond between NZD/USD and USD/CAD. While the combination's weekly correlation median indicated a strengthening of the negative relationship, the distribution also formed a second peak near the zero level, signalling an unusual amount of weakly positive readings.