Street Signals
Why Are FX Markets So Quiet?
Nov 16, 2023
Guests Michael Metcalfe and Peter Vincent discuss the calmness in currency markets despite ongoing global uncertainties. They explore topics such as cross-country basis, cash holdings, mortgage structures, Eurozone rates, US economy, US election effects, and fiscal sustainability. The podcast also mentions a break announcement and a web portal for research on macroeconomics and markets.
24:04
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Quick takeaways
- The calmness in FX markets can be attributed to the convergence of interest rate outlooks and a shift in investor behavior towards the short-end of the yield curve.
- Investors' increased preference for cash and decreased demand for foreign investments are contributing to the low volatility in FX markets.
Deep dives
Quietness in Markets and Low Volatility
The podcast episode discusses the current quietness in markets and the low volatility observed. The speaker notes that there are very few event risks for the remainder of the year, which has led to low volatility. The equity volatility has significantly dropped, and there are signs of rate volatility also decreasing. However, the most surprising aspect is the calmness in the FX markets, which has been going on for a while. The speaker and guests speculate on the reasons behind this calmness, including the convergence of interest rate outlooks and the shift in investor behavior towards the short-end of the yield curve.
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