Market overview for September 24 - September 28 2018: The market sees feeble volatility both in terms of median levels and highest peaks. The CAD and GBP Indexes post the greatest September gains, while the Swiss and Japanese safe-havens are the only ones to report MTD losses. Correlations signal extensions of previous patterns.
[/ANNOUNCE] {ATTACHMENT}Currency Indexes (CI)
The past week proved to be a reversal for half of the observed currency indexes. Thus the previous period's prominent losers – the Pound's and the US Dollar's measures, – spent the week in the appreciation area, while the Euro's and the Swiss Franc's gauges erased previous gains.
{ATTACHMENT}North America: USD, CAD
The USD Index posted a prominent weekly gain after two weeks of palpable losses. This latest result allowed the measure to record its September change as positive, and put its YTD reading at the top place among the observed currencies.
The Dollar's index remained flat for most of the period. The measure started the week on par with the previous period's close and recorded most of its gains on Thursday, when it enjoyed some post-Fed confidence and got additional support from uncertainty over the Italian budged, which weighted on its European peers. On Friday, the index was rivaled by its Canadian counterpart and lost its ground before crossing above the +1.00% line, but managed to erased most of the losses in the last hours of trading, finishing the week near its period's high.
The Canadian Dollar's gauge was the only measure do outperform the USD Index in the past period, as it posted its greatest weekly growth since June 29. The result was also the measure's third weekly gain in a row, and so the CAD Index reported the best MTD and QTD changes, as well as the second-greatest YTD growth.
The Loonie's index spent the first half of week near the baseline, and seemed posed to become one the main losers as it tumbled to the -0.75% mark in Wednesday's North American trading. The measure was weighted by the early-day decline in oil prices in the beginning of the session, and got additional pressure later on from the reports of President Trump declining to meet with French President Trudeau over the NAFTA talks. The CAD Index fell to its period's low of -0.80% and held near the -0.75% line until Thursday New York open, briefly taking over the worst performer's position from the Swiss Franc's measure. From there, however, the Loonie's gauge made a rapid recovery, spurred forward by oil prices returning to their rally and by Friday's GDP number coming in better-than-expected. With that the index covered 1.75 pp in the last day and a half and managed to beat its US peer by 0.10 pp at Friday's close.
{ATTACHMENT}Europe: EUR, GBP, CHF
The Swiss Franc's index tumbled throughout the period, with its most prominent moves opposing the changes in its Canadian peer, and ended up posting its greatest weekly loss in the year so far. The result put its September change at -1.26%, the second-worst reading after the Yen's, but was not dramatic enough to knock the longer-term values into the negative territory.
The Euro's measure, in turn, posted the week's second-greatest weekly loss, which pushed its YTD change back below zero after it reported its first positive reading in nine weeks in the previous period.
The EUR Index received a strong push in the beginning of the week, when the ECB President Draghi's made what was perceived as hawkish remarks on inflation. The Euro's measure added 0.35 pp to hold just below the +0.50% line, but eased to the +0.25% mark in the following hours. The measure held near the level until Thursday morning, when it lost 0.30 pp and dipped into the negative area with reports on the Italian government possibly postponing the 2019 budget meeting over some new complications in reaching an agreement. The EUR Index clung to the baseline for the next 24 hours, but went into a downslide in Friday's European session, weighted down by the news that the for the Italian trade deficit was set at 2.6% of GDP, above the 2% recommended by the EU and 1.6% viewed by the country's Finance Minister. The single currency's measure touched the -0.75% in the early afternoon, but managed to win back 0.25 pp until the week's close. Meanwhile, the GBP Index spent the week recovering from the previous Friday's tumble and posted a moderate weekly growth of 0.45%. This allowed the gauge to report the second-greatest September gain of 1.10%.
The Pound's index sent most of the period well above its peers, with various upbeat Brexit-related comments supporting its recovery throughout Monday, Tuesday, and Wednesday. Thursday saw the measure peak to the +1.25% line and record the week's absolute high, but subsequent trading proved the momentum to be unsustainable, and the index finished the week with only the third-highest gain.
Asia-Pacific: JPY, AUD, NZD
The Asia-Pacific currencies were little noticeable during the past period as they were the only ones to remain within the ±0.50% range.
The AUD and JPY Indexes were notable for also being the only ones to open the week with a prominent change from the previous Friday's close, as the former's base value stood 0.28 pp below the previous reading, and the latter's – 0.18 pp above it. Still, neither of the measures reversed the previous period's results, as the Aussie's index posted its third consecutive gain, and the Yen's gauge – its third consecutive loss. With that the JPY Index reported its year's greatest monthly decline so far.
Meanwhile, the NZD Index finished the week virtually unchanged, reporting no major developments on any of the long-term bases.
Volatility
{ATTACHMENT}Turbulence among the observed currencies remained on the relatively feeble levels of the past month. The Pound was the only major to post higher-than-0.030% volatility median, while the US Dollar was the least turbulent currency with the reading of 0.025%.
Peaks marking the sharp moves of the observed indexes were also subdued, with none of them reaching the 0.100% line.
{ATTACHMENT}North America: USD, CAD
{ATTACHMENT}Compared to its peers, both North American currencies were largely unremarkable in terms of volatility.
The week's main turbulence-provoking events for the US Dollar was the FOMC rate statement release and press conference, but they seemed to evoke more prominent reactions from the Greenback's peers. While the removal of the wording "accommodative policy" from the statement seemed to be perceived as a dovish move by the market, the USD Index lost 0.13 pp, causing the currency's aggregate volatility to jump to 0.050%, the Australian and New Zealand Dollar's reported volatility of 0.072% and 0.065%, respectively, overshadowing the Greenback's reading.
The FOMC press conference, in turn, proved to have a greater impact on the Dollar, as Fed Chair Powel's assurance that the change in the FOMC statement's wording did not signal a change in policy caused the USD Index to gain 0.26 pp in half an hour, hit the +0.25% line and fall back by 0.21 pp. The zigzagging pushed the Greenback's volatility to 0.072% – its highest value for the week.
Europe: EUR, GBP, CHF
{ATTACHMENT}The GBP Index's rapid advances throughout the week put the currency's aggregate turbulence measure above the market's average on numerous occasions, but the most interesting peak was arguably the one formed on Tuesday morning. The splash of volatility coincided with the ECB Chief Economist Praet's speech, in which he downplayed Monday's Mario Draghi's inflation comments, stating that progress in inflation was a long process, and was dependent on very easy monetary conditions. The GBP Index added 0.14 pp and the Euro's measure lost the same amount in the next ten minutes, with the two currencies' volatility gauges jumping to 0.048% and 0.050%, respectively.
Meanwhile, Mario Draghi's speech was the most volatile event for the Europeans, and the second most volatility for all the observed currencies. The EUR Index's surge pushed the single currency's volatility aggregate to 0.089%, with above-0.100% values reported by EUR/JPY, EUR/NZD, and EUR/USD.
Asia-Pacific: JPY, AUD, NZD
{ATTACHMENT}Despite reporting the most unremarkable results in terms of the Currency Index, the New Zealand Dollar was notable for forming several prominent volatility peaks, with all of them marking domestic economic events.
The Kiwi's highest volatility peak marked the RBNZ rate announcement, which was accompanied by a press-release acknowledging "signs of core inflation picking up" and pushed the NZD Index up by 0.20 pp.
Tuesday night saw the Kiwi's aggregate form two above-average peak. The first one, reaching only 0.032% but nevertheless standing out in between-session tranquillity, was fuelled by the NZD Index's 0.11 pp fall in response to the trade balance release, which showed the widest monthly trade deficit on record. The second peak, in turn, was formed during Asian trading and stood at 0.061%. This value marked the NZD Index's 0.23 pp surge following the release of improved business confidence.
Meanwhile, the Australian Dollar's aggregate volatility measure posted the week's absolute high of 0.092%, which was reached against the background of the Fed rate decision announcement and statement release. Interestingly, while the USD Index lost only 0.13 pp, the AUD and NZD Indexes gained 0.37 pp and 0.24 pp, respectively. The highest volatility among the Aussie's pairs was reported by GBP/AUD, as the GBP Index was the one to post the greatest drop of 0.17 pp.
Currency Pair Correlations
{ATTACHMENT}Most of the combinations selected for the period signalled continuation of the bond change patterns seen in the past month, both among the strengthening and the weakening correlations.
The most prominent ones in latter group were GBP/USD correlations with the Antipodean pairs – NZD/USD and AUD/USD. Both combinations lowered their weekly medians below the 0.50-point line, signalling that most of the readings seen during the period were insignificant.
Somewhat similarly, EUR/USD reported weakening of the bonds with the same pairs, though this time the development was new and the decrease was observed in relation to both long-term distributions. The effect was the greatest in the major's correlation with NZD/USD, which dropped its weekly median to the significance threshold.
Major strengthening of bonds, in turn, was reported by combinations with GBP/JPY and AUD/CAD.
The former showed its weekly median correlation with EUR/USD climb above the 0.50-point line, though its distribution still sported a notably heavy insignificant tail. Meanwhile, correlations between GBP/JPY and GBP/USD stood at extremely strong levels.
AUD/CAD correlations with NZD/USD showed similar pattern to the GBP/JPY & EUR/USD readings, with the weekly distribution shifting further away from the half-yearly levels, while AUD/CAD & AUD/USD combination followed the pattern of GBP/JPY & GBP/USD.