3 Jan 2014
Flash: Illiquidity driving GBP/USD turbulence - Investec
FXstreet.com (Barcelona) - Jonathan Pryor, Corporate Treasury Analyst at Investec comments that if every trading day in 2014 is as volatile as yesterday then he is not sure if we’ll all make it to the end of the year.
Key Quotes
“After GBP/USD began the day flirting with 1.6600 it eventually closed in the low 1.64’s as thin holiday markets and profit taking hammered the pair for much of the afternoon to create one of the largest daily drops in GBP/USD for a number of months. “
“Equity markets also suffered a reverse in fortunes in Europe and US yesterday and this continued in Asia overnight with the Hang Seng index in Hong Kong closing down by over 2.00%.”
“So, what caused yesterday’s market corrections? We’re inclined to blame it on it being ‘that time of year’ when illiquidity sits in the driving seat and the market lacks definitive direction.”
“However, there were a couple of newsworthy releases throughout the day, particularly in the US, which supported the resurgence in the dollar against G10 western currencies such as the pound and euro.”
“Jobless Claims and the important ISM Manufacturing report both came in better than expectations across the pond with the employment component of the ISM rising to its highest level since June 2011 which carries greater significance than ever due to the importance of unemployment in context with the Federal Reserve’s policy plans (sub 6.5% is supposedly when the Fed will begin to consider raising rates).”
Key Quotes
“After GBP/USD began the day flirting with 1.6600 it eventually closed in the low 1.64’s as thin holiday markets and profit taking hammered the pair for much of the afternoon to create one of the largest daily drops in GBP/USD for a number of months. “
“Equity markets also suffered a reverse in fortunes in Europe and US yesterday and this continued in Asia overnight with the Hang Seng index in Hong Kong closing down by over 2.00%.”
“So, what caused yesterday’s market corrections? We’re inclined to blame it on it being ‘that time of year’ when illiquidity sits in the driving seat and the market lacks definitive direction.”
“However, there were a couple of newsworthy releases throughout the day, particularly in the US, which supported the resurgence in the dollar against G10 western currencies such as the pound and euro.”
“Jobless Claims and the important ISM Manufacturing report both came in better than expectations across the pond with the employment component of the ISM rising to its highest level since June 2011 which carries greater significance than ever due to the importance of unemployment in context with the Federal Reserve’s policy plans (sub 6.5% is supposedly when the Fed will begin to consider raising rates).”