Global currency markets: Low volatility as another turbulent year ends

Enrique Díaz-Álvarez28/Dec/2015Currency Updates

Traditionally, the last two weeks of a year are the quietest, and so far 2015 is no exception.

After an unusually volatile year, dominated by the US Dollar rally and sharp sell-offs in the emerging markets, currencies generally traded in very tight ranges last week.

The main news in the financial markets was the strong rebound in commodity prices, led by oil. We viewed the sell-off in the previous week as an overreaction to the Federal Reserve’s rate hike, and oil below $40 a barrel appears to be pricing in a global recession that is not in sight.

Emerging market currencies generally stabilised or traded higher against the Dollar on the back of the rally in commodities.

Major currencies in detail:


As the holiday season is upon us there was little in terms of economic or policy news in the UK, and the data we did get was mixed.

The current account deficit for the third quarter showed a surprising improvement, and it appears likely to close the year at less than 4% of GDP. However, growth for the previous two quarters was revised down slightly, by one tenth each, bringing the year-on-year print down to 2.1% from 2.3%.

Currency markets, however, were firmly in pre-holiday mood and resolutely ignored the news. Sterling ended the short week almost exactly unchanged against both the Euro and the US Dollar.


With no economic news of significance released over the week, the main focus was on the aftermath of the Spanish elections and the difficulty Spain is facing trying to form a stable government. As a consequence, sovereign bonds have sold off modestly since the election, while equities have recovered most of their initial losses, aided by the general risk asset rally worldwide. We think that the Spanish elections serve as a healthy reminder that politics will play an increasingly important role in the financial markets over the medium term in the Eurozone.


The US also saw a week of mixed economic news.

Durable goods orders in November rebounded to a degree but the details were less reassuring than the headline number. Housing sales came in much lower than expected.

None of the recent second-tier indicators in the US are likely to affect the Fed’s increasingly explicit view that rate hikes are likely to come at the pace of roughly once a quarter throughout 2016.


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Written by Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.