Special Reports

Bears take a step back as some calm returns

Posted on January 19, 2016 at 12:13 pm GMT

The third week of 2016 has started in a calmer manner as major stock markets do not seem to be extending the heavy losses of the previous week. In addition, oil prices had deteriorated so rapidly that some sort of recovery was inevitable. The negative trend since the start of the year needs a lot of progress to be reversed but investors will probably welcome any respite to the selling. Positive data has also helped today in view of the [..]

Taking stock of 2016 in foreign exchange

Posted on January 12, 2016 at 11:03 am GMT

The first 7 trading days of 2016 have featured some very significant moves in currencies and other financial markets. The two main themes that appear to be driving markets are the weakness in the Chinese stock market and the currency (the yuan) as well as fresh record lows in the price of oil. Oil for example has already fallen by around 20% since the beginning of the year and is now challenging the $30 a barrel level – the lowest [..]

An eventful beginning to 2016

Posted on January 5, 2016 at 3:14 pm GMT

While the closing days of 2015 were a mostly quiet affair for financial markets, the beginning of 2016 has certainly seen some action. In risk assets such as stocks but for the foreign exchange market too, there have been some sizeable moves, which have provided a useful lesson in that market participants need to be ready for turbulence at any time – even during or right after seasonal holidays. In terms of major currencies, the Japanese yen appears to have [..]

US Dollar: Buy on the rumor, sell or buy more on the fact?

Posted on December 18, 2015 at 2:57 pm GMT

The announcement of the Fed’s rate hike on December 16 was a very well anticipated event, as economists and analysts were almost unanimous in awaiting such a development. The market was not entirely convinced however, as even on the eve of the rate hike, futures’ markets gave around a 20% probability that the Fed would keep rates on hold. Therefore, the news that the Fed had hiked should not have come as a surprise to market observers and one would [..]

Oil price drop becomes a major theme for markets

Posted on December 15, 2015 at 10:36 am GMT

As the oil price broke to fresh 7-year lows this week and even threatened to make fresh 11-year lows, many other markets took note. First of all the rapidly dropping oil price was also interpreted as a sign of a weak global economy; something that weighed on risk sentiment. Other non-energy commodities are also making fresh lows such as industrial metals, while an index of commodity prices – the CRB index – is at its lowest since 2009. In the [..]

Yuan’s 4-year low versus dollar could mark path of further depreciation

Posted on December 11, 2015 at 2:54 pm GMT

The yuan’s midpoint versus the US dollar was set at a fresh 4-year low today by the People’s Bank of China. The PBOC set the midpoint at 6.4358 and the currency traded as low as 6.4550. The Chinese economy has slowed down in recent years; from growth rates that exceeded 10% in the aftermath of the 2008-2009 financial crisis down to 7% and below more recently. China is also trying to shift its economy away from manufacturing and towards services [..]

What’s next for euro / dollar after the ECB let down euro bears?

Posted on December 8, 2015 at 2:16 pm GMT

Following the dramatic move in foreign exchange markets the previous Thursday, when the euro surged on the back of a smaller-than-expected boost to ECB stimulus, it is worth asking what’s next for euro / dollar. Of course the short-term pain felt by euro bears was intense, but there could be some interesting medium-term implications outside the short-term pain. First of all, although euro bears were dealt a serious blow last Thursday, they are apparently slowly coming out again. Euro / [..]

Miscommunication costs euro bears dear this week

Posted on December 4, 2015 at 11:37 am GMT

The stimulus measures announced by ECB President Mario Draghi, together with the reduction in the deposit rate to -0.30%, left markets underwhelmed on Thursday. This caused a huge rally in the euro – the biggest such daily move in 6 years. What were the reasons for the market’s big surprise though? Although it is hard to speculate on exactly why this happened, it appears that a combination of miscommunication, false perceptions and some infighting within the ECB Governing Council could [..]

Explaining the “policy divergence” driving the euro / dollar lower

Posted on December 1, 2015 at 3:13 pm GMT

Currency traders have been using the justification of “policy divergence” in recent months in order to drive the euro lower – particularly against the US dollar. In the broadest of terms it means that the US monetary authority, the Federal Reserve is intent on tightening policy while the respective Eurozone authority, the European Central Bank, is loosening policy. Specifically, while the ECB is going to expand its QE program and cut its deposit rate deeper into negative territory, the Fed [..]

Post-thanksgiving trade session sees volatility

Posted on November 27, 2015 at 2:26 pm GMT

Friday’s trading session following the Thanksgiving Thursday holiday is traditionally a quiet affair as many US traders remain away from their desks the day following the holiday. The trading day itself is shortened (half-day) and there are no US data releases. This results in a lack of liquidity and thin trading conditions as this is a day when big real money investors tend not to execute their orders. When these conditions occur, two things can happen. Either trading itself becomes [..]

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