Graphic Rewind: USD in a Loll as Volatility Approaches Four Year Low
The Dow Jones FXCM Dollar Index (ticker: USDollar) entered a loll following the spike in volatility that market participants experienced last week. The volatility occurred at the same time that Central Banks from around the world announced their overnight cash rate (OCR) decisions. The US Dollar moved 114 points over the course of six hours following the announcement that the European Central Bank held the OCR at 0.75%. Traders were expecting some form of stimulus to be announced after the ECB’s President Mario Draghi commented, the week prior, that the ECB would do “whatever it takes” to preserve the Euro. Following the ECB’s press conference risk appetite rallied. The US Dollar pulled back slightly after a press release stated that the U.S. unemployment rate rose to 8.3 percent during July, while the economy added 163K jobs.
After the beginning of the U.S. session on Monday the US dollar entered into a loll with the CVIX, a proxy for volatility in the currency market, fell below 9.0 to approach near the July four year low. So far this trading week risk appetite remains relatively high, and the US Dollar continues to be relatively unresponsive to major event risk as volatility remains subdued.
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