Manfred Wiebogen President ACI The Financial Markets Association
Manfred Wiebogen President ACI The Financial Markets Association

Volatility returns to the FX markets

Manfred Wiebogen looks at why the current increase of volatility in the FX market is the result of uncertain and obscure economical developments.

Friday, March 7th 2008, just when writing these lines the Euro hit a record high against the Dollar at 1,5459 after the release of the U.S. non-farm payrolls. The effective rate surprised the market consensus and turned out to be a drop for the second straight month. There is a lot of concern about how the huge downturn in the U.S. economy is going to affect the rest of the world. Politics and economic outlook nurture the financial markets with uncertainty which results in continuing high volatility at the end. Let me assume that volatility is not what Central Banks are looking for. It will be rather the opposite: Central Banks have a strong interest in a smooth functioning of their economies. Just recently the Eurogroup Chairman Jean-Claude Juncker criticized the Euro’s sharp gain and stated clearly ‘we don’t like excess volatility in the foreign exchange rate’. But to stay realistic: in a complex and changing world in the sense of no or only little overall volatility in the...continued

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