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27 Mar 2015
USD rally might see a pause – TDS
FXStreet (Barcelona) - FX Strategists at TD Securities, view that the next few weeks might see a pause in USD’s rally and a drop in FX volatility.
Key Quotes
“Despite the pop in the USD into the end of the week, we continue to think the broader rally will pause in the next few weeks. If it does, it is likely that major FX vol will ease back as well.”
“Choppy markets have prompted some market participants to head for the sidelines in the past week but calmer markets may be at hand.”
“We ran a quick and dirty study of the seasonality in FX volatility and found that JPM’s Global Volatility Index also experiences a seasonal quirk moving into Q2; 18 of the last 20 Aprils have seen FX vol fall by this measure and the month is easily the worst month of the year for vol performance over the year.”
“Our rolling studies show that the USD has a relatively strong, positive correlation with JPM FX vol index (+62% on a rolling 1-month window) while EUR and the GBP are similarly negatively correlated currently. It looks as if a dip in the USD and a modest slide in vol will go hand in hand over the next few weeks.”
Key Quotes
“Despite the pop in the USD into the end of the week, we continue to think the broader rally will pause in the next few weeks. If it does, it is likely that major FX vol will ease back as well.”
“Choppy markets have prompted some market participants to head for the sidelines in the past week but calmer markets may be at hand.”
“We ran a quick and dirty study of the seasonality in FX volatility and found that JPM’s Global Volatility Index also experiences a seasonal quirk moving into Q2; 18 of the last 20 Aprils have seen FX vol fall by this measure and the month is easily the worst month of the year for vol performance over the year.”
“Our rolling studies show that the USD has a relatively strong, positive correlation with JPM FX vol index (+62% on a rolling 1-month window) while EUR and the GBP are similarly negatively correlated currently. It looks as if a dip in the USD and a modest slide in vol will go hand in hand over the next few weeks.”