The players in the international currency markets is again Tuesday extremely reluctant to take new positions on the books. But the quiet markets is not so bad that it's not good for something.
The silent currency movements means that volatility has decreased significantly despite the great uncertainty. And low volatility means lower costs for currency hedging through options when precisely volatility - along with several other parameters – is included in the calculation of the premium on the options. And when volatility has quite a large weight in the total base, the quiet market has resulted in a halving of the option premium.
Investors wait due to this week's big events Wednesday featuring the German court's assessment of the German participation in the permanent rescue fund ESM is compatible with the German constitution. The outcome may result in a sharp exchange reaction of the single currency, the euro, if the court votes against participation, but this scenario is considered the least likely among economists and analysts.
After Wednesday's German fingerprints on the market, comes Federal Reserve Bank with the outcome of the two-day monetary policy meeting. Here it is first and foremost a fresh round of quantitative easing, which is investors' preferred outcome. For this will be able give a little positive kick to the ailing economy and get the cash up from the mattress and investors out of the sand.
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