Stability is one thing, but the quiet that currently hangs over the markets carries the hallmarks of extraordinary complacency and an inevitable reversal to the opposite extreme. Given the markets lean and positioning over the years, the more charged scenario would be one where risk aversion and deleveraging unfold.
Forex traders should rejoice at the prospect of April ending, as it has been a month to forget: 10-day EURUSD average trading range (ATR) is at its lowest level since mid-2007, a testament to the low volatility and quite frankly boring trading environment. Fortunately, with a number of key event risks on the economic calendar, the time for the Euro’s slumber to end may finally be arriving.
The Japanese Yen finished higher as a noteworthy pullback in the Nikkei 225 pushed the USD/JPY exchange rate to weekly lows. Yet the true fireworks may come on upcoming Bank of Japan and US Federal Reserve rate decisions, while US labor market data may likewise spark big moves in the USDJPY.
The GBP/USD may continue to mark fresh highs ahead of the next Bank of England (BoE)meeting on May 8 as the stronger recovery in the U.K. puts increased pressure on the central bank to normalize monetary policy sooner rather than later.
Gold prices are firmer on the week with the precious metal advancing 0.52% to trade at $1300 ahead of the New York close on Friday. The advance comes on the back of a sell-off in broader risk assets this week with all three major US stock indices closing markedly lower on the session.