Slim ranges
The theme we noted yesterday continued strong in markets with the weekend’s events failing to have a meaningful impact upon markets. Tight trading ranges prevailed within most markets with measures of volatility failing to breakout higher. Spreads on options remained tight at least within the FX space as implied volatility continued to fall. With the headlines emanating from Russia this weekend failing to drive a safehaven bid within the market, what factors will the market cling to this week to determine price action?
Despite a relatively light data calendar for the front-end of this week, the focus will almost certainly continue to be upon rates: inflation and its antidote interest alike. Given that the market does not appear too jittery given the tight trading ranges and low implied volatility that we are observing, there could be demand for high yielding currencies as part of the carry trade. Note the continued outperformance of carry trades such a long high yielding Latam FX versus currencies including NZD and the Yen, as well as the Euro and Franc to a lesser extent.
The lower the volatility in the market, the lower the value at risk calculations and higher the probability of investors and traders entering such trades. The low volatility environment we are witnessing despite geopolitical uncertainty may provide the sustenance required for such trends to endure for longer. With recession expectations building in the Eurozone following underwhelming PMI data last week, that carry trade is less likely to be funded by Euro sales for now. That is at least until spot prices and borrowing costs adjust to the Eurozone stagnation risk. With the ECB Symposium now underway, hawkish comments from the ECB could stave off any further Euro price adjustment in the short run.
Discussion and Analysis by Charles Porter
Click Here to Subscribe to the SGM-FX Newsletter
Related Insights
Daily Brief – Gold and Silver
Humphrey Percy
Wed 4 Feb 2026
Gold and Silver Due to the vertiginous moves in both these precious metals all markets are more than usually fixated on the price action at present. Yesterday, both steadied and clawed back some of the recent losses with Gold rising almost 6% and Silver 10% to USD 4921, and USD 86.70 respectively at the time […]
Daily Brief – EU Household Income
Humphrey Percy
Mon 9 Feb 2026
EU Household Income As envious eyes are cast from some in the UK towards the EU, it is worth noting that the EU average household income has increased by 7% between 2019 and 2024 i.e. since the pandemic. In case you are wondering, the UK has increased its household income by 9% over the same […]
Daily Brief – UK Markets
Humphrey Percy
Fri 6 Feb 2026
UK Markets As widely expected, the Bank of England’s Monetary Policy Committee left interest rates unchanged. While of course closely watched by markets, the decision and subsequent Press Conference was overshadowed by the continuing political drama unfolding in nearby Westminster. With a 174-seat majority, it would have seemed unlikely or even inconceivable a few short […]
