Market overview for October 29 – November 2 2018: Median volatility exceeds monthly readings, but the peaks remain subdued. The NZ Dollar's index posts its greatest weekly gain since the beginning of the year, while the Yen's measure reports its greatest loss.
[/ANNOUNCE] {ATTACHMENT}Currency Indexes (CI)
With various reports on Brexit and US-China trade relationship, the past week saw a lot of activity among the safe-havens and risky assets. Thus the start of November was market by rallies of the Antipodean and the Pound's indexes, while their peers closed the week below the baseline. Notably, the NZD Index posted its greatest weekly gain since the beginning of the year, while the Yen's measure reported its greatest loss.
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North America: USD, CAD
The US Dollar's index started November below the baseline, posting a moderate weekly decline of 0.36%, virtually on par with the Euro's and the Canadian Dollar's measures. The loss, coupled with the rally of the Kiwi's gauge, lowered the index's QTD reading to the third position, leaving it behind those of the Yen and the NZ Dollar. Meanwhile, the measure's YTD growth remained the greatest among the observed currencies, holding above the +4.00% mark for the fifth consecutive week. The 4W change, in turn, was weakly negative, signalling the first medium-term decline since September 21.
The USD Index spent the first three days of the period on a slow uptrend, reaching the +0.50% line by Wednesday and holding the level throughout the day. November, however, brought a sharp change to the currency indexes' scenery. As the Pound's measure surged and started to climb up with the Antipodeans, the USD Index turned south. It dropped below the -0.50% mark on Friday as its Australian and Kiwi peers surged up, but managed to erase some of the losses later in the day, gaining support from strong US labour and trade balance data.
The Canadian Dollar's index finished the week at -0.38%, erasing most of the modest gains it reported in the previous period. The result prompted the measure's YTD change to return to the negative area.
The CAD Index was moving largely in sync with its US peer throughout the week, albeit remaining around 0.30 pp below the Greenback's measure. The gap was erased on Thursday, when the USD Index suffered a greater downslide than its Canadian counterpart, and the two gauges merged paths at the -0.50% level. On Friday, the CAD Index was little affected by the Antipodeans' surge and briefly held above the US Dollar's gauge, but lost 0.18 pp on worst-than-expected labour and trade balance numbers, thus returning to its position below the Greenback's measure.
{ATTACHMENT}Europe: EUR, GBP, CHF
The Euro's measure finished the period at -0.41%, slightly below its US and Canadian peers, thus posting its fourth consecutive weekly loss. With that the index's YTD change returned to the early August level of -1.55%.
The EUR Index held at the baseline during Monday and Tuesday, and started to slide down in Wednesday's European trading, stopping just a few pp above its US and Canadian peers in Thursday evening. It held above the two measure throughout most of Friday, but lost 0.23 pp in the afternoon after it was reported that the ECB was considering the introduction of fresh TLTROs, suggesting that European banks could be in need of funds. The drop caused the EUR Index to lose its small advantage, and finish the week on par with its North American counterparts.
The Swiss Franc's index posted the week's second-greatest decline of 1.07%, thus erasing the modest gains it posted in the previous period after four weeks of losses. The measure QTD change fell to the worst level among the observed currencies, but its YTD reading still remained one of the three positive ones.
During the past week, the CHF Index moved mostly parallel to the Euro's measure, but proved to be more susceptible to downward pressure. Thus the gauge fell below the baseline at the start of the period and reached the -1.00% line on Thursday, holding near the level until the end of the week.
After suffering losses for three periods in a row and posting its greatest weekly decline in the previous period, the Pound's measure reported the second-best result in the past week. The 0.93% weekly gain returned the index's QTD change to the positive area. On the 4W basis, however, the Pound's index reported the greatest decline among the observed measures.
The GBP Index started the week flat, but went south on Tuesday, falling to its period's low of -0.74% in late afternoon. Wednesday's European trading, however, saw the measure turn around, and in the afternoon the index added 0.30 pp to break above the baseline after UK Brexit Secretary Raab said that he expected the Brexit deal to be reached by November 21. The start of Thursday's Asian trading was marked by an even sharper surge, as the GBP Index gained 0.49 pp on reports that a deal on post-Brexit financial services was made. The measure proceeded to sway around the +0.50% level until tumbling by 0.31 pp when the claims were denied. That, however, did not stop the GBP Index from entering another wave of strengthening immediately after the tumble, and, gaining some support from the BoE, the measure reached the +1.00% mark in late afternoon, holding the level till the end of the period.
Asia-Pacific: JPY, AUD, NZD
The Yen's index continued the pattern of alternating results, as it posted the week's greatest loss after being the best performer in the previous period. The -1.72% reading was also the measure's greatest weekly decline since the year's start, and caused its 26W change to fall into the negative territory after three weeks of positive results.
The JPY Index fell to the -0.50% line in Monday's European trading, and breached the level on Tuesday, as a day-long downtrend took off, stopping at the -1.00% on Wednesday. The afternoon saw the measure jump back to the -0.50% line, but the level was lost again as the Tokyo session opened on Thursday. On Friday, as Bloomberg reported that President Trump tasked his Cabinet with drafting a possible China deal, the JPY Index suffered the week's sharpest 10-minute fall of 0.36 pp, falling below the -1.50% line that it was unable to cross until the end of the period. Interestingly, later in the day CNBC claimed the news to be untrue, and the two countries to have "a long was to go" until reaching an agreement, but the report did not cause any considerable reactions from the observed indexes.
The Australian Dollar's index reported the week's second-greatest growth and its fourth consecutive weekly gain, the measure's best result since March 9. Its QTD change shifted into positive territory after remaining negative throughout October.
The AUD Index started the week feebly, nearing the -0.50% line on Monday, but changed direction in Tuesday's Asian trading. The measure returned to the positive area after President Trump said in an interview with FOX News Channel that he thought that the US would "make a great deal with China". The AUD Index climbed to the +0.50% mark in the afternoon, but Wednesday saw it loose momentum with the releases of disappointing headline CPI data and greater-than-expected fall in Chinese PMIs. Thursday, in turn, was marked by a rally which started off with the strong trade balance release and improving risk sentiment, and which took the measure to the +1.00% level. On Friday, the US-China headlines prompted the AUD Index to make the week's sharpest 10-minute jump of 0.39 pp and add the total of 0.49 pp to briefly cross above the +1.50% line. The measure lost the level in the second half of the day, and the Greenback's gauge started to gain ground.
After becoming the second-worst performer in the previous period, the New Zealand Dollar's measure reported the week's greatest gain of 1.75% and its biggest weekly growth since the beginning of the year. The result also caused the gauge to post the second-best QTD change and the greatest 4W growth.
The NZD Index was moving in sync with the Aussie's measure throughout the week, but held around 0.40 pp above its Australian peer. The only major event in the NZ economic calendar was the release of the ANZ Business Confidence, which prompted the NZD Index to gain 0.13 pp in 30 minutes.
Volatility
{ATTACHMENT}All of the observed currencies reported median volatility levels above the monthly readings, with the highest values of 0.036-0.037% being posted by the Yen, the Antipodeans, and the Pound. Still, maximum volatility levels remained subdued, with none of the peaks reaching the 0.100% mark.
{ATTACHMENT}Europe: EUR, GBP, CHF
{ATTACHMENT}As always, most of the period's prominent volatility levels were fuelled by the Brexit news. The week's third-highest peak of 0.092% was prompted by the GBP Index's 0.31 pp tumble following the denial of the financial services deal being reached between the UK and the EU, while the 0.31 pp surge that was caused by the original reports pushed the Pound's turbulence measure only to 0.077%. Finally, Brexit Secretary Raab's comment, which prompted the 0.30 pp jump of the GBP Index, pushed the Pound's volatility to 0.087%, while the subsequent correction pushed to turbulence measure to the week's second-highest peak of 0.098%.
Friday's ECB headline and the associated 0.14 pp drop of the EUR Index pushed the single currency's volatility to 0.052%, a moderate reading in general, but a fairly prominent one in relation to the usual turbulence levels of the Euro.
Asia-Pacific: JPY, AUD, NZD
{ATTACHMENT}The period's most prominent volatility peaks were prompted by the news about the US-China trade relations, which simultaneously affected the risky Antipodeans and the safe-haven Yen. Both of the reports were positive for the former and negative for the latter, and in both cases the Australian Dollar was the most affected currency.
Currency Pair Correlations
{ATTACHMENT}The period's correlation highlighted the synchronicity between the US and the Canadian Dollars, as well as the extremely tight bonds between the Antipodean. Thus AUD/CAD correlations with NZD/USD and AUD/USD shifted most of their weekly values above the 0.50-point significance threshold, and correlations between AUD/USD and NZD/USD cut their lower distribution tail short as they held entirely above 0.60 points.