Talking Points:
• Volatility measures are often considered 'fear' gauges, but the 'risk' assessment can be interpretive
• They are also general activity measures, and certain assets/currencies perform in different conditions
• As volatility cools, the SPX rises but Yen crosses are slow to respond while some FX pairs may surprise
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US equities and the VIX volatility index tend to move in a virtual mirror to each other. Relationships like this have helped cultivate the VIX's (and other volatility measures') position as a 'fear' gauge. However, that speculative interpretation doesn't always hold true for all markets - even ones that are traditionally sensitive to changes in sentiment. At its foundation, volatility gauges measure movement in a market. Some assets or pairs tend to benefit or suffer for greater movement - outside of the mantle of 'risk'. That is perhaps why USDJPY isn't advancing as FX volatility levels fade but GBPUSD does. It can also highlight opportunities with EURUSD and AUDUSD should quiet continue to hold. We look at how different benchmarks respond to volatility against the backdrop of fading VIX readings in today's Strategy Video.
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