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4 Jun 2014
Frustrating markets for traders - FXStreet
FXStreet (Guatemala) - Ivan Delgado, head of Asian editors at FXStreet noted the uncommon calm in the FX market in his article, with turnover and volatility reaching ridiculously low levels.
Key Quotes:
“The current regulatory probes into alleged currency manipulation at the largest dealing banks has led to a sudden deprivation in how information on order flow is being shared, with these banks no longer allowing instant messaging in chat rooms”.
“As Steve Barrow, strategist at Standard Bank, quoted by the Financial Times, notes: “If currency traders shy away from such ‘information trades’, for fear of reprisals . . . it seems reasonable to think that currency volatility might fall as well.””
“Most central banks still remain sidelined awaiting to make major decisions on interest rates”.
“The market needs to develop new macro-themes, plain and clear, so that traders can confidently start discounting such future scenario, as the current difficulty to decipher new divergences in central bank policies is definitely having a huge impact on the depressed levels of activity seen”.
“One of the pivotal problems is the lack of clarity on the Fed's monetary policies”.
“Failure to clearly telegraph when they will embark upon a tightening campaign is a major source of uncertainty for market participants”.
“What the market really needs, other than additional policy definition by the rest of central banks (ECB, BoJ, BoC, SNB, RBA), is to either receive clearer clues from the Federal Reserve on the possible timing of an awaited hiking cycle, or instead, further definition in policy by the five mentioned central above”.
“Another possibility would be a return to the RORO theme (Risk on-Risk off), although such environment, when it occurs, it tends to cause sharp short-lived spikes off the mean rather than establishing a new trend”.
“For now, with Fed policies still dependent on fundamentals, which at the moment provide mix signals, and most other central banks still in a 'wait and see mode', currency investors are likely to see the low volatility extend, thus the need to adapt to the new normal”.
Key Quotes:
“The current regulatory probes into alleged currency manipulation at the largest dealing banks has led to a sudden deprivation in how information on order flow is being shared, with these banks no longer allowing instant messaging in chat rooms”.
“As Steve Barrow, strategist at Standard Bank, quoted by the Financial Times, notes: “If currency traders shy away from such ‘information trades’, for fear of reprisals . . . it seems reasonable to think that currency volatility might fall as well.””
“Most central banks still remain sidelined awaiting to make major decisions on interest rates”.
“The market needs to develop new macro-themes, plain and clear, so that traders can confidently start discounting such future scenario, as the current difficulty to decipher new divergences in central bank policies is definitely having a huge impact on the depressed levels of activity seen”.
“One of the pivotal problems is the lack of clarity on the Fed's monetary policies”.
“Failure to clearly telegraph when they will embark upon a tightening campaign is a major source of uncertainty for market participants”.
“What the market really needs, other than additional policy definition by the rest of central banks (ECB, BoJ, BoC, SNB, RBA), is to either receive clearer clues from the Federal Reserve on the possible timing of an awaited hiking cycle, or instead, further definition in policy by the five mentioned central above”.
“Another possibility would be a return to the RORO theme (Risk on-Risk off), although such environment, when it occurs, it tends to cause sharp short-lived spikes off the mean rather than establishing a new trend”.
“For now, with Fed policies still dependent on fundamentals, which at the moment provide mix signals, and most other central banks still in a 'wait and see mode', currency investors are likely to see the low volatility extend, thus the need to adapt to the new normal”.