Market overview for April 1 - 5, 2019: The Yen's, the Franc's, and the Kiwi indexes are the only ones to post losses. The Greenback's measure lifts its YTD change above zero for the second time this year. Volatility tumbles to strongly subdued levels.
[/ANNOUNCE] {ATTACHMENT}Currency Indexes (CI)
The first week of April saw most of the observed indexes remain in a narrow range between the ±0.50% lines, with most of the measures closing the period with marginal gains. The only gauges to post losses were the safe-haven Yen's and Franc's indexes, and the commodity-related Kiwi's measure, while the NZD and GBP Indexes were the only ones to break out of the range during the week.
Notably, the Asia-Pacific indexes opened the week with significant shift from the preceding Friday close, pointing at the over-the-weekend strengthening of the risk sentiment.
The result had little effect on the long-term standings, but saw the USD Index's YTD change climb into the positive area for the second time since the beginning of the year, and the Aussie's reading overcome that of its Kiwi neighbour's to take the third place for the first time since early February.
{ATTACHMENT}North America: USD, CAD
The US Dollar's index opened the week 0.10 pp below the preceding Friday close and spent the period moving between the baseline and the +0.50% mark. It ended up at the upper bound of its range, posting a modest 0.44% gain that matched its previous result. This time, however, the number made it the period's best performer, with the measure outpacing its peers in the final trading hours of the week. The growth also allowed the USD Index to lift its YTD change into the positive territory for the second time since the beginning of the year.
The Canadian Dollar's index started the week strong and held leadership until Tuesday afternoon, which saw it drop below the +0.50% line and proceed with a downslide to the baseline. Nevertheless, the measure managed to remain in the appreciation area and posted a slight weekly growth of 0.17%, becoming the last among the period's gainers. On the YTD basis, the CAD Index retained its second-best position.
{ATTACHMENT}Europe: EUR, GBP, CHF
The Swiss Franc's gauge started the week feebly alongside its Japanese peer and spent the whole period below the baseline, ending up with a 0.14% loss. Combined with between-period changes, the result was enough to erase the measure's two previous gains, pushing its YTD decline back beyond the -1.60% mark.
The Euro's index also started out subdued, but managed to settle above the baseline in the second part of the period and finished the week with a 0.29% gain, earning itself the third place. This marked the fourth consecutive week with the Euro's and the Franc's measures ending up on the opposing sides of the baseline.
After two periods of strong losses, the Pound's measure posted a modest gain of 0.37%, becoming the second-best performer after the Greenback's measure.
After the tumble suffered in the second half of the previous period, the GBP Index opened the week with a splash of optimism, with the measure rallying ahead of the indicative votes and nearing the +1.00% line in the afternoon. Late Monday evening, however, saw the British Parliament reject all Brexit motions that were selected by the Speaker, sending the GBP Index down by 0.56 pp.
Tuesday was marked by cabinet meetings, and the Pound's measure slid further down with reports stating that the ministers saw a long extension and possible PM's resignation as a likely outcome of the Brexit drama, while Theresa May was claimed to have said that she would support no-deal over revocation of Article 50. After the meetings, PM May announced that she would seek further extension of Article 50 to try and gain support from the Labour Party. The party leader, Jeremy Corbyn, said that he would be happy to meet with the PM, and the developments saw the GBP Index erase its previous losses and surge to the +1.00% mark.
On Wednesday morning, the Conservative Party MP Letwin said that they could "work with the government now", while the UK Brexit secretary Barclay commented on a motion to block no-deal Brexit tabled the day prior, expressing confidence that the Parliament would pass the law and saying that the PM would not be able ignore it. With that London open saw the GBP Index jump to the week's high above the +1.25% line.
Afterwards the measure bounced from the line, and tried to retake the level by Thursday morning, but saw the optimism dissolve. Barclay's new comments seemed to lose some of the previous resolve, with the Brexit Secretary noting that the Parliament did not have full control over whether the UK would leave the EU with or without a deal. In additional, talks between PM May and Jeremy Corbyn did not yield any palpable result. The GBP Index went into a downslide, tumbling to the +0.50% line by Thursday afternoon, and then erasing most of what remained from the week's gains by lowering to the +0.50% mark on Friday.
The week ended with the PM May sending the European Council President Donald Tusk a letter asking for another Article 50 extension, and reports claiming that Tusk would offer the UK "a flexible Brexit extension of up to one year". The spokesman for the EC, however, said that the decision on the subject would be made on a summit on Wednesday, and France, Spain, and Belgium were reported to not be persuaded by PM May's arguments.
Asia-Pacific: JPY, AUD, NZD
The Australian Dollar's index opened the period 0.23 pp above the preceding Friday close and posted a 0.21% weekly gain, thus adding some solid ground to the growth it reported in the previous period. The results allowed the measure to push its YTD change above the +1.30% mark and edge closer to the Loonie's reading.
With over-the-weekend reports hailing progress made in US-China trade talks, and Chinese NBS manufacturing PMI unexpectedly crossing above the 50.00-point mark on Sunday, the AUD Index opened the week with a surge, but failed to gain momentum. With that the measure held near the baseline throughout Monday, and then tumbled to the -0.50% line on Tuesday, when it suffered the week's second-sharpest 10-minute drop of 0.26 pp after the release of the RBA April monetary policy meeting minutes. Reports noted that the statement put little emphasis on recent improvements in the Chinese data and progress in the trade negotiations, and made a small negative change in language related to the labour market, going from claims that continued improvement in conditions "should lift wages" to "is expected to lift wages".
After the drop, the AUD Index continued to ease down till the end of the day, moving alongside its Kiwi counterpart. Wednesday, however, brought the releases of better-than-expected retail sales and widened trade surplus, causing the Aussie's measure to post the week sharpest 10-minute surge of 0.34 pp and add the total of 0.43 pp, and setting the measure on a recovery course. By late Thursday, the AUD Index crossed above the baseline and settled among the week's five gainers.
The Kiwi's index also opened the period a jump, gaining 0.20 pp on the preceding Friday close, but found no support for an upwards movement among the week's events. On Monday, the NZD Index tumbled alongside its UK peer, being undermined by a drop in NZIER business confidence index and thus becoming the only gauge to post losses amid the Pound's decline.
Afterwards, the NZD Index remained confined between the -1.00% and 0.50% lines, and breached the lower limit on Friday, becoming the week's worst performer. This marked the third consecutive period when the Kiwi's and the Aussie's gauges ended up on the opposite sides of the baseline.
The Yen's index opened the week 0.32 pp below the preceding Friday close and posted a 0.25% loss, becoming the period's second-worst performer. The result saw the JPY Index's YTD decline deepen, nearing the -2.00% mark and reaching further than the Franc measure's reading, thus making the Yen's gauge the second-worst performer on that basis as well.
Volatility
{ATTACHMENT}With the observed indexes showing little action during the week, the turbulence measures fell back to subdued levels, and even the Asia-Pacific currencies reported weekly medians below the 0.030% threshold. The only currency to signal overturbulence for the Pound, while the Euro, the Franc, and the US Dollar reported extremely low volatility medians of 0.024%.
Volatility peaks were also modest, with none of the highs managing to cross the 0.100% line, and only the Pound's turbulence measure nearing the mark.
{ATTACHMENT}Europe: EUR, GBP, CHF
{ATTACHMENT}Most of the past week's prominent volatility peaks marked the GBP Index's reactions to the Brexit developments, and the highest one was formed as the Pound's measure tumbled after Monday's indicative votes. The initial 0.34 pp fall pushed the currency's volatility aggregate to 0.087%, while the subsequent +0.20 pp rebound pushing the turbulence gauge to the week's absolute high of 0.099%.
The second-highest peak of the Pound's volatility was observed on Wednesday, when the GBP Index spiked by 0.25 pp with no apparent trigger.
The peaks were mostly fuelled by GBP/JPY, GBP/USD, and GBP/CHF, with the clearly Brexit-related moves also well observed in GBP/CAD volatility.
Asia-Pacific: JPY, AUD, NZD
{ATTACHMENT}The only currencies to push their volatility aggregates to levels comparable with the Pound's reading were the Antipodeans.
The Kiwi's volatility aggregate reached its high alongside the Pound's gauge on Monday, when the NZD Index tumbled after the NZIER Business Confidence release. The peak was mostly fuelled by NZD/CHF, NZD/CAD, and NZD/USD, with GBP/NZD dragging the average down.
The week's second-highest volatility peak was formed by the AUD Index's surge after the release of Australian retail sales and trade balance data, while another prominent peak marked the measure's fall in response to the RBA meeting minutes publication. In both cases, the highest volatility was reported by AUD/JPY, AUD/USD, and GBP/AUD.
Currency Pair Correlations
{ATTACHMENT}The most prominent weekly correlation distributions pointed at extensions of the medium-term patterns, with most of them, unsurprisingly, describing the Pound pairs' relationships.
The greatest weakening was observed in correlations between GBP/USD and EUR/USD, whose distribution cut its upper tail almost at the long-term median levels, indicating a general absence of any reliable connection between the pairs' movements. Some weakening was also observed in correlations between GBP/JPY and USD/JPY, though in this case the effect was much more modest.
Correlation between the Pound's safe-haven pairs, in turn, remained on extremely high levels. GBP/CHF & GBP/USD weekly distribution cut its lower tail just below the long-term median, signalling an almost perfect linear relationship. GBP/JPY correlations with GBP/CHF and GBP/USD showed slightly less dramatic changes, but still held their weekly medians near the 1.00-point mark and cut their lower tails above the 0.50-point significance threshold.
Meanwhile, AUD/USD correlations with AUD/NZD and GBP/USD, as well as AUD/CAD correlations with EUR/USD, showed marginal weakening, but these developments only served to indicate fewer-than-usual strong values for the measure that point at generally insignificant bonds anyway.