Post on 08-Jul-2020
15/01/2018
Major Events of the Week
Time (GMT) Flag Currency Event Currency Index Volatility Peak
MONDAY, JANUARY 8 SESSIONS
15:30 CAD BoC Business Outlook Survey +0.11 pp 0.04%
TUESDAY, JANUARY 9 SESSIONS
05:00 JPY Consumer Confidence -0.09 pp 0.04%
10:00 EUR Unemployment Rate -0.10 pp 0.04%
WEDNESDAY, JANUARY 10 SESSIONS
10:30 USD Report on China Reducing Purchases of US Treasuries -0.44 pp 0.08%
19:00 CAD Report on US Leaving NAFTA -0.69 pp 0.11%
THURSDAY, JANUARY 11 SESSIONS
00:30 AUD Retail Sales +0.44 pp 0.07%
12:30 EUR ECB Monetary Policy Meeting Accounts +0.61 pp 0.10%
13:30 CAD NHPI -0.22 pp 0.06%
13:30 USD PPI, Initial Jobless Claims -0.17 pp 0.05%
FRIDAY, JANUARY 12 SESSIONS
08:00 AUD Chinese M2 Money Supply, Chinese New Loans -0.16 pp 0.03%
13:30 USD CPI, Retail Sales +0.23 pp 0.05%
13:30 GBP Report on Spain and Denmark Agreement on Brexit Deal +0.55 pp 0.13%
Relative Currency Strength
The past period marked the first full-scale trading week
of the year, and the activity increased notably among
the observed indexes.
The week’s main gainer was the Yen’s gauge, which
showed the worst result in the previous period and now
posted its greatest weekly growth since mid-November.
The measure jumped above its peers on early Tuesday,
after it was reported that the BoJ reduced the long-term
government bond purchases that are part of the bank’s
quantitative and qualitative easing programme. The
news fueled expectations that the year might see a start
of the stimulus policy unwinding, and the JPY Index’s
rally stretched into late Wednesday, where it reached
its high of +2.00% against the background of the
Loonie’s tumble. Afterwards the momentum was lost,
and the gauge spent the rest of the week slowly losing
ground, with a notable dip taking place on Friday as the
European currencies went up.
A bunch of currencies finished the period at the +0.50%
mark, with the biggest growth of +0.54% posted by the
Euro’s gauge. The measure started the week sluggishly,
moving in a mild downtrend throughout Monday and
remaining flat near the -0.50% line until Thursday noon.
There was a slight pickup on Wednesday, but the real
breakthrough came after Thursday’s release of the ECB
December meeting minutes. The report pointed to
strengthening in the economy and hinted that the ECB
could soon start to prepare markets for the end of the
stimulus programme. The EUR Index enjoyed the week’s
days of the week, but started to decline on Wednesday, sliding to its
low of -0.74% by mid-Thursday. The situation changed on Friday,
when it first followed its European peers in their uplift, and then had a
breakthrough of its own after Bloomberg reported that Dutch and
Spanish finance ministers have agreed to pursue a soft Brexit deal.
The Pound’s measure enjoyed the week’s greatest 10-minute jump of
0.49 pp, breaking through the baseline, and continued to climb up till
the end of the day despite the subsequent denial of any special
agreements between the two countries voiced by the spokesman for
the Spanish ministry.
On the other side of the baseline, the Loonie’s gauge was in the lead,
effectively negating the previous period’s skyrocketing move. The
gauge was declining throughout the whole period, with the principal
shock coming on late Wednesday, when Reuters reported that two
Canadian government officials believed that Trump administration
would pull the US out of NAFTA. The CAD Index suffered the week’s
greatest 10-minute plunge of 0.33%, falling well below its peers and
reaching its week’s low of -1.67%. The gauge ultimately finished the
period only 0.22 pp above that value.
second-greatest 10-minute jump of 0.38 pp and saw the rally continue into Friday, where it got additional fuel from reports on preliminary agreement
being reached in Germany to negotiate a coalition government.
The NZD Index posted a slightly lesser 0.51% weekly gain, despite showing relatively strong performance throughout the week. The measure started off
with an uptrend and reached the +0.50% line on Tuesday. It swayed around that level until Thursday, where it started gaining speed at the end of the
Asian session and reached its week’s high of +1.31% by the end of the day. On Friday, however, the gauge behaved similarly to its Japanese peer and slid
down against the background of the Euro’s, the Franc’s, and the Pound’s growth.
The latter’s gauge was the final index to settle near the +0.50% level at the end of the period. The GBP Index swayed around the baseline for the first two
Relative Currency Strength
Currency Volatility
As was suggested by the currency indexes, the turbulence
on the market returned to the average level after the
tranquil holiday weeks. Interestingly, three out of the six
prominent volatility peaks of the week were reached on
the back of news reports rather than economic releases.
The smallest of these peaks stood at 0.080% and was
formed by the Greenback’s tumble in response to the
Bloomberg’s report that the Chinese officials reviewing the
country’s foreign-exchange holdings recommended either
slowing or halting its purchases of the US Treasuries. The
information was dismissed the next day by the State
Administration of Foreign Exchange, but that did not
evoke an equally strong response on the market. A notably
stronger-than-average rise of volatility was observed in
NZD/USD, whose measure stood at 0.109%, while a low
value of 0.054% was posted by the pair with Loonie, which
followed its US peer in the decline.
The next peak was related to the NAFTA headlines, which
caused the Loonie to tumble and put its average volatility
at 0.112%. The sharpest reactions came from CAD/JPY and
CAD/CHF, whose turbulence measures climbed to 0.129%
and 0.118%, respectively.
Finally, the week’s largest volatility spike of 0.130% was
attributable to the Pound’s surge against the background
of the news on the Brexit deal. A remarkably strong
reaction was again displayed by the pair with the Kiwi,
with GBP/NZD volatility reaching 0.158%. The smallest
volatility of 0.118% was posted by GBP/CHF, and all other
pairs raised their readings above the 0.120% mark.
Currency Pair Correlations
The deviations between the weekly and the monthly
correlations were not as pronounced as in the previous
period, but still scored closer to the strong side, with seven
out of ten displayed combinations posting at least 0.10
points shifts between short- and long-term medians.
Most of the prominent changes were related to the bonds
between the European currencies, the Yen, and the
Greenback. Thus the weekly correlations between EUR/JPY
and EUR/USD shifted their distribution away from
abnormally high monthly levels and in par with the half-
yearly readings, posting a 0.167 pp drop in the median
value.
Weakening was also observed in the bond between the
Pound’s pairs, though the shifts of the GBP/JPY
correlations with GBP/USD and GBP/CHF were directed
away from the long-terms levels.
Strengthening, on the hand, was reported by the
correlations between EUR/JPY and GBP/JPY, EUR/USD and
USD/CHF, and EUR/USD and GBP/USD. All these
combinations saw their correlation distributions shift
towards the stronger long-term levels.
Meanwhile, some tightening was observed in the bonds
between AUD/USD and EUR/USD, and AUD/CAD and AUD/
USD, while the correlations between EUR/CAD and USD/
CAD shifted their weekly median below the long-term
values.
Explanations
Violin Plot
Violin Plot combines several rotated Kernel Density
Plots for ease of comparison
Relative Density
Ob
serv
ed V
alu
es
Density Plots:
26-week
4-week
1-week
Medians:
1-week
4-week
26-week
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