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US Dollar, FX Majors Face Volatility Risk Despite Holiday Lull

US Dollar, FX Majors Face Volatility Risk Despite Holiday Lull

2016-12-27 22:36:00
Ilya Spivak, Head Strategist, APAC
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Talking Points:

  • Currency markets at near-standstill in thin holiday trade
  • European, US news-flow offers little impetus for activity
  • Low participation can boost sudden knee-jerk volatility

Currency markets are near-standstill as liquidity remains scarce and the few market participants actually paying attention in the inter-holiday lull are reticent to commit to a direction until the calendar turns to 2017. A near-empty European data docket will do little to inspire activity.

Looking further ahead, there seems little reason to think that US home sales figures will shake things loose after an impressive consumer confidence reading passed largely unnoticed yesterday. The results will probably mean little for Fed policy bets as officials focus on the on-coming regime change on the fiscal side.

As noted previously however, the quiet may give way to corrective reversals bookending 2016. Any such moves could be exaggerated by low participation levels, making for sudden spikes of volatility. With that in mind, traders would be wise not to take current tranquility for granted.

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Asia Session

US Dollar, FX Majors Face Volatility Risk Despite Holiday Lull

European Session

US Dollar, FX Majors Face Volatility Risk Despite Holiday Lull

** All times noted in GMT

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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