Wednesday, November 11, 2015

A Perfect Storm of central banker speeches | High short-term volatility likely in the Forex market

Today sees not one, but two of the world’s most influential central bankers, Mario Draghi (Eurozone) and Janet Yellen (USA) make speeches in their respective jurisdictions, to be followed by a raft of members of the US Federal Reserve. And Mr. Draghi will be speaking twice, initially at 08:30 GMT as President of the ECB before the Committee on Economic and Monetary Affairs (ECON), at the EU Parliament in Brussels, and then at 10:30 GMT in the same forum but in his capacity as Chairman of the European Systemic Risk Board (ESRB), a body that was set up in the wake of the Global Financial Crisis to monitor for, and deal with, any issues that may impact on the stability of the financial system.

This follows a speech that Mr. Draghi gave yesterday at a Bank of England event in London that was organised to discuss banking regulation. He said, unsurprisingly given his known standing in this matter, that ever closer integration was needed for the EU banking and capital markets. He said nothing yesterday about what we wanted to hear: whether or not his central bank is likely to accelerate Quantitative Easing in the Eurozone in December. To complicate matters, yesterday was a holiday in the US (Veteran’s Day), so trading on the Forex markets was thin.

Then, later in the day today, around the open in New York, Ms. Yellen will speak at the Federal Reserve Board sponsored “Monetary Policy Implementation and Transmission in the Post-Crisis Period” conference in Washington. Other speakers at this event include her colleagues in the Federal Reserve, Bullard, Lacker, Fischer (Vice chair of the Board of Governors) Evans and Dudley. Any one of these is capable of making comments that could impact the Forex market, and they even have the potential to be contradictory of one another.

High short-term volatility likely in the Forex market

Historical research using the Mandelbrot algorithmic routine indicates that the market is highly sensitive to speeches by central bankers. Not only that, but the perceptions of different market participants can vary, both in the minutes and hours that follow the words used, and among those who have the capacity to move the market. On a day like today that could lead to high short-term volatility.

No comments:

Post a Comment