The markets begin the Christmas and New Year holidays, which usually brings reduced liquidity on the currency market and days without trading sessions on stock exchanges. However, in the history, there were cases where due to the low liquidity appeared relatively high volatility. Nevertheless, this year seems to be a very calm period.
The macroeconomic calendar is quite light in the upcoming week. Hence, investors will not wait for any key news and data, which may lead to a significant decline in activity in many asset classes with the upcoming Christmas break. It is worth noting that the German stock market will close on December 24-26. In turn, the shortened trading session on Christmas Eve will take place on the stock market in the United States and Great Britain. Many markets will also be closed on December 26.
Nevertheless, it is worth remembering that the currency market is open almost without any break (trading does not take place on December 25 and January 1), but the trade can run much more quietly. This calmness is also pointed out by investors on the currency options market. The indicator for the global currency market volatility remains close to its lowest level in more than five years with a decline in turnover as we approach the end of the year.
JPMorgan Global FX Volatility Index was down to 5.56 percent on Friday, which is the lowest value since July 2014. The index fell in December for the third month in a row. NZD, AUD and CAD are characterized by the lowest monthly implied volatility among the G-10 currencies measured by deviations from the annual average - according to the Bloomberg data. Low volatility and its expected decline was a trend that has dominated the market in 2019. It seems that was a consequence of the global decline in interest rates and the reduction in interest rate differentials between currencies. Volatility usually raised only on unprecedented events such as those associated with brexit whether the trade war. It seems that 2020 may be a continuation of these issues.
We would like to kindly inform you that the next comment will appear on January 13.
Merry Christmas and Happy New Year!
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
65% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.