At the risk of sounding like a broken record, volatility in major currencies remains very depressed. If anything, daily swings in developed and emerging market currencies have receded even further in recent sessions.
To put it in context, EUR/USD has traded in a 1.5% range in the past month. Even the more risk-sensitive AUD/USD and NZD/USD crosses have stuck to very narrow ranges around 0.68 and 0.64, respectively, in the past week. It says it all when the normally hyper-volatile Turkish Lira has traded in a range only 2.7% wide versus the Dollar in the past month.
There are a number of possible reasons for this lack of FX price action. These include clear indications that many major central banks – including the Fed, the RBA and RBNZ – have seemingly paused their rate cutting cycles, even if the bias remains towards cutting rates. Another is that markets are awaiting tangible developments on the geo-political front, including US-China trade negotiations.
Sterling has been no exception, showing very little reaction to yesterday’s first televised debate between the leader of the ruling Conservative Party and Prime Minister Boris Johnson and the leader of the Labour Party, Jeremy Corbyn. A lot has been written about who performed best on the night but ultimately, in an era of almost continuous political coverage, British voters and markets will have learnt little new about the respective party leaders’ policies or personalities.
The Conservatives remain well ahead in opinion polls with the general election only three weeks away. But if history has taught us one thing it’s that the UK’s first-past-the-post electoral system and uneven distribution of candidates across seats makes it neigh impossible to accurately translate UK-wide polls into actual seat numbers.
