• Trendiness continues to fall in FX markets, with little sign of last week’s FOMC-inspired dollar move reflected in aggregate momentum. Volatility has risen to levels last seen in late 2011. Uniformity remains at very high levels, however, suggesting the dollar is driving all currency pairs.
• Valuation remains the single most important macro driver of currencies. This is seeing EUR, USD, GBP outperform and AUD, NZD and NOK underperform. In terms of market variables, carry continues to be strongly (-89%) negatively correlated to currencies, while sovereign risk has become the variable most positively (+58%) correlated. This suggests we have entered a risk-off regime.
Read the full report: Market Research
Deutsche Bank