(19 June 2024 – Global) Corporates are reacting to the prospect of currencies trading in narrow ranges in the short to medium term following Federal Reserve Chair Jerome Powell’s projection for a single rate cut this year.
David Finnerty reports for Bloomberg that there were signs currency markets were becoming more turbulent when the AUD, EUR and JPY appreciated over one percent after the US reported weak inflation data this month, however implied volatility has ebbed following the Fed Reserve announcement.
FX traders are now monitoring upcoming events such as the French elections or US economic data such as core PCE, the Fed’s preferred measure of inflation, to determine if event risk can trigger major moves in currencies. The US election looms as a volatility driver in Q4 2024 with Goldman Sachs Group suggesting the first presidential debate on 27 June may even have the potential to trigger FX price volatility.
“The Fed announcement is likely to dampen volatility in the short to medium term. The Fed has removed some uncertainty around future policy paths, and this should mean less implied volatility in general” commented Citi APAC Head of FX, Nathan Swami.