48 Hours
There has been a noticeable shift in geopolitical risk this week. So how, baring a mild slip lower in EURCHF, have FX markets remained quite so flat? Sure, there have been some contained intraday spikes in some commodity prices but ultimately those legs higher have been thwarted, often in the very same trading session as they begun. The answer is it is the 48 hours that lays ahead of markets that is keeping risk on and volatility subdued, but not necessarily for the better.
Thanks to a significant deterioration in pricing of the Fed’s current easing cycle, all focus has been on monetary policy and financial conditions. That’s not to downplay the longer-term importance of the rise in geopolitical risk this week. Events of note have been the political pressure from POTUS on the EU to raise tariffs to 100% on buyers of Russian oil; the shooting down of drones in EU airspace; and, most importantly, Israel’s targeted attack in Qatar. Despite all this, due to the salience of forthcoming data, geopolitics has still taken a backseat in favour of economic variables and, in particular, jobs data.
The next 48 hours sees the release of hard-hitting data on everything from jobs, through to inflation, through to consumer sentiment. The main swathe of data comes today at 13:30 BST in the form of unemployment numbers and inflation. This heavy hitting data meant that any meaningful risk adjustments on the back of geopolitics earlier this week have been foregone for fear of mis-stepping on the monetary front in the latter portion of this week.
Discussion and Analysis by Charles Porter
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