Last year the FX market was highly event driven, with periods of sustained low volatility occasionally punctuated by large but episodic market moves.
Looking ahead to 2017 and there are already clearly some events set to take place that have the potential to drive further bursts of volatility, namely the invocation of Article 50 by Britain to begin its exit from the European Union and the scheduled political elections in France, Holland and Germany.
In addition, the change of policy direction expected under US Presidential-elect, Donald Trump, and the US Federal Reserve’s indication at the end of 2016 that it currently plans to raise rates three times this year are expected to be major drivers of the currency markets in the coming year.
Thomson Reuters has announced it is introducing more granular pricing for AUD/USD across its spot FX trading platforms. The change has been in beta testing with clients for some time and the change will officially be rolled out at the end of March.
Pricing for the pair will be in half pips to five decimal places, the new pricing regime will also be reflected in the firm’s market data offerings and added value calculations, as well as on its Eikon screens.
In this week's podcast Colin Lambert and Galen Stops tackle two big stories in the FX market: the recent flash crash in the Asia markets and the changes at Citi's FX prime brokerage (FXPB) business.Both Lambert and Stops express skepticism that the news regarding Apple's profits in China was the cause of the flash crash, although the former is equally unsure about an alternative theory put forward by the latter to explain the price moves. Both agree though that the event was symptomatic of changes in the nature of liquidity in the FX market, and note a disparity between what many market participants will say in private and in public on this matter.
A report in the Reserve Bank of Australia’s Statement on Monetary Policy looks at the flash event in FX markets on January 3 when the yen appreciated some 3% in a matter of seconds before falling back, but fails to discern a single factor behind the move.
Citing the fragmentation of the FX markets across an increasing number of different platforms, the RBA says “it is difficult to draw firm conclusions on the cause of the flash event”, adding that three factors are likely to have contributed to what it terms the “brief deterioration in market conditions”.