27 Jan 2015
Volatility in FX markets is set to re-emerge – Danske Bank
FXStreet (Edinburgh) - In the opinion of analysts at Danske Bank, it seems possible that volatility levels in the FX space could return to previous levels in the near term.
Key Quotes
“The past two weeks have been very volatile with first the SNB scrapping its minimum exchange rate for the CHF against the EUR and secondly the ECB QE announcement”.
“Implied FX volatilities have in general increased significantly – especially the front end of the volatility curves has spiked up – but prices on longer-term FX options have increased as well”.
“Needless to say that CHF-crosses have seen the biggest volatility increases”.
“However, as investors digest the past week’s events and as risk sentiment in general is expected to be supported by the flood of EUR that is about to enter the market from the ECB bond purchases, implied FX volatilities are likely to fall back again - probably not to the low levels seen over the summer - but a scenario with FX volatility around the levels seen in November and early December 2014 seems likely”.
Key Quotes
“The past two weeks have been very volatile with first the SNB scrapping its minimum exchange rate for the CHF against the EUR and secondly the ECB QE announcement”.
“Implied FX volatilities have in general increased significantly – especially the front end of the volatility curves has spiked up – but prices on longer-term FX options have increased as well”.
“Needless to say that CHF-crosses have seen the biggest volatility increases”.
“However, as investors digest the past week’s events and as risk sentiment in general is expected to be supported by the flood of EUR that is about to enter the market from the ECB bond purchases, implied FX volatilities are likely to fall back again - probably not to the low levels seen over the summer - but a scenario with FX volatility around the levels seen in November and early December 2014 seems likely”.