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27 Mar 2015
Safe haven currencies break from their FOMC ranges, FX volatile - Scotiabank
FXStreet (Barcelona) - Camilla Sutton CFA, CMT, Chief FX Strategist at Scotiabank, shares the key themes emerging in the FX space, with few currency pairs breaking out of their March FOMC ranges, and that while volatility is seen in the market, FX still awaits a catalyst.
Key Quotes
“FOMC March 18th FX ranges have been important ones to watch. This week we have seen three themes emerge:
1) The safe haven currencies have been bid—have broken out and closed outside of their FOMC March 18 range, favouring currency strength (USD weakness). Accordingly USDJPY, whose FOMC range of 119.30 to 121.41 has shifted direction and trended lower ever since March 18th.
The same is true for USDCHF and gold (with gold trending higher). This reflects both the rise in geopolitical risk but also the reaction to shifting monetary policy expectations.
2) EUR and CAD have broken above their FOMC day range, but failed to sustain the strength and instead have dipped back within old familiar ranges. For EUR, whose FOMC range was 1.0580 to 1.1043, yesterday’s failure to maintain strength above 1.1043 is technically bearish.
3) GBP has contained to trade within its FOMC range of 1.4635 to 1.5166 range, constrained by building election uncertainty and aggressive BoE pricing, considering the inflationary backdrop.”
“FX volatile but range bound: The core theme is that with a pushing out of the expected timing of the first Fed interest rate hike and an improvement in European data, but still low global inflationary pressures, FX markets have shifted back into ranges, waiting for a catalyst to drive them outside.”
Key Quotes
“FOMC March 18th FX ranges have been important ones to watch. This week we have seen three themes emerge:
1) The safe haven currencies have been bid—have broken out and closed outside of their FOMC March 18 range, favouring currency strength (USD weakness). Accordingly USDJPY, whose FOMC range of 119.30 to 121.41 has shifted direction and trended lower ever since March 18th.
The same is true for USDCHF and gold (with gold trending higher). This reflects both the rise in geopolitical risk but also the reaction to shifting monetary policy expectations.
2) EUR and CAD have broken above their FOMC day range, but failed to sustain the strength and instead have dipped back within old familiar ranges. For EUR, whose FOMC range was 1.0580 to 1.1043, yesterday’s failure to maintain strength above 1.1043 is technically bearish.
3) GBP has contained to trade within its FOMC range of 1.4635 to 1.5166 range, constrained by building election uncertainty and aggressive BoE pricing, considering the inflationary backdrop.”
“FX volatile but range bound: The core theme is that with a pushing out of the expected timing of the first Fed interest rate hike and an improvement in European data, but still low global inflationary pressures, FX markets have shifted back into ranges, waiting for a catalyst to drive them outside.”