Realised and implied volatility marked time through September, giving a green light to neither risk-on nor risk-off trades and continued to perpetuate the rangebound behaviour in FX markets. This means that while the USD was weaker, the overall move in markets was limited.
This behaviour is not only being driven by a lack of investor conviction, but also by a diminishing opportunity set. Figure 2 highlights that there has been a convergence in growth outcomes (in the realms of PMIs at least) across the G10 and Asia. For FX investors this means there are fewer economic divergences to capitalise on.
Furthermore, when one looks at deviations from medium-term valuation metrics, it’s clear that in the few places where there is a macro deviation story (like in the UK), it is very well priced. Further, it highlights that commodity currencies sit around 0.5% standard deviations from fair value, which is hardly a misvaluation to get excited about, particularly when there is no matching shift in the economic landscape.
Overall, this once again leaves the market in a difficult spot. There are fewer glaring individual macro stories which are breaking away from the crowd, and those that are (GBP, NZD, or JPY) look very well priced. Further, when one looks at the opportunity set from the broader macro environment, it appears that both the recent improvement in global growth, the slower pace of tightening from the Fed, and the recent reacceleration in global liquidity have all been accounted for with volatility at the lower end of its two year range, and with currencies like the AUD, NZD, and KRW edging towards range highs.
Copyright © 2016 ANZ, eFXnews™
The article is published by one of the foremost sources of Forex trading information. Link to the original article above.
from eFXNews http://feedproxy.google.com/~r/Efxnews/~3/CP0_aXl2kaM/fx-market-difficult-spot-trade-right-now-anz
from Online Forex Trading Resource http://its-veso.tumblr.com/post/151101950837
No comments:
Post a Comment