News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
EUR/USD
Bullish
Oil - US Crude
Bullish
Wall Street
Bullish
Gold
Bullish
GBP/USD
Mixed
USD/JPY
Bullish
More View more
Real Time News
  • What is seasonal change in volatility. Are we going through one right now? Find out: https://t.co/G0qfpOmMl2 https://t.co/WfxEHnGobD
  • 🇰🇷 Business Confidence (SEP) Actual: 68 Previous: 66 https://www.dailyfx.com/economic-calendar#2020-09-28
  • Forex Update: As of 20:00, these are your best and worst performers based on the London trading schedule: 🇬🇧GBP: 0.68% 🇦🇺AUD: 0.63% 🇨🇭CHF: 0.49% 🇳🇿NZD: 0.11% 🇨🇦CAD: 0.11% 🇯🇵JPY: 0.07% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/IsJQn29Zao
  • Heads Up:🇰🇷 Business Confidence (SEP) due at 21:00 GMT (15min) Previous: 66 https://www.dailyfx.com/economic-calendar#2020-09-28
  • Commodities Update: As of 20:00, these are your best and worst performers based on the London trading schedule: Silver: 3.39% Gold: 1.07% Oil - US Crude: 0.01% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/CrlmkhjxrC
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 96.82%, while traders in Germany 30 are at opposite extremes with 63.84%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/SsckRDHj4I
  • Poll: The $SPX and other US indices enjoyed a nice bounce this past session to ease fears of an imminent avalanche, but this could also be a 'relief' in anticipation of a bigger event: Tuesday's Presidential debate. Do you believe this debate matters to the markets?
  • After an explosive start to the summer, the silver price rally has come to a screeching halt as the seasons have changed to the fall. Get your $XAG market update from @CVecchioFX here:https://t.co/aMPCW8dkla https://t.co/p1nzWwmtAb
  • Indices Update: As of 20:00, these are your best and worst performers based on the London trading schedule: FTSE 100: 0.02% Wall Street: 0.02% Germany 30: 0.02% US 500: 0.01% France 40: -0.11% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/QTIL1lfFBU
  • Commodities Update: NYM WTI Crude 40.64 (+0.97%), ICE Brent Crude 42.49 (+1.36%), NYM NYH Gasoline 124.90 (+2.87%). [delayed]
Currency Volatility Implosion Sees US Dollar Pairs Potentially Under-pricing NFP Risk

Currency Volatility Implosion Sees US Dollar Pairs Potentially Under-pricing NFP Risk

2019-07-04 11:00:00
Justin McQueen, Analyst
Share:

Currency Volatility Talking Points

  • FX Volatility Falling to 2019 Lows
  • US Jobs Report Risk Potentially Under-priced

Top 10 most volatile currency pairs and how to trade them

For a more in-depth analysis on FX, check out the Q3 FX Forecast

FX Volatility Falling to 2019 Lows

Much like equity market volatility, FX markets have also seen a significant drop in implied volatility. While part of this can be explained by the summer lull on the horizon, concerns over global growth that have been flagged up by the plummet in global bond yields, has failed to spill-over into the FX market and equity market. Alongside this, the global central bank U-turn in the monetary policy path has also contributed to subdued market volatility as hopes of further stimulus from the likes of the ECB and Federal Reserve has seen equity markets grind higher.

Currency Volatility Implosion Sees US Dollar Pairs Potentially Under-pricing NFP Risk

US Jobs Report Risk Potentially Under-priced

This has particularly been the case with the latter as money markets have fully priced in a 25bps rate cut at the end of the month with an outside chance of a 50% cut. However, as Fed’s Bullard stated last week, a 50bps rate cut may be somewhat overdone. Thus, the size of the NFP beat/miss will be critical in determining whether the Fed provides a 50bps cut or not and as such, this could have implications for FX markets, which seem to be under-pricing the risk that NFP poses.

Currency Volatility Implosion Sees US Dollar Pairs Potentially Under-pricing NFP Risk

Overnight implied volatility in major USD pairs has seen little additional risk premium with EURUSD vols 0.075vols to 7.275, suggesting a 34pip breakeven (meaning that investors would need to see at least a 34pip move above or below the strike to realise a profit), while USDJPY vols remain subdued. USDCAD has seen implied vols jump by 2.7 to 8.4vols with straddles at 46pips, given that the expiry also covers the Canadian jobs report.

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES