Activity has also spiked around EURUSD options with Monday expiries covering Trump’s coronation at 9% volatilities, reports Jeppe Norup from the FX Options desk in Copenhagen.
“So far in 2017, vols have been sliding but there were some big moves Thursday on the back of the ECB event,” says Norup. “We’re also seeing some big demand around the two-month expiry which takes in the next Federal Open Market Committee meeting in March when it looks likely that the Fed will raise rates again.”
There was some strong volatility around ECB and we expect even more through the weekend,” he says. “EURUSD is trading at a 70 pips straddle versus 60 pips for the ECB.”
EURUSD one-month volatility has slowed in 2017 but it looks like it’s ready to accelerate
Equities holding course
Equities may have had some of the fire taking out of the post-Trump election rally in the last week or so, but the bullish case remains intact for the major indices and should remain so for much of 2017, says Saxo Bank’s head of equities strategy Peter Garnry.
“There is still support and we are still in an uptrend,” says the equities chief. “While we are trading at some elevated levels, 2017 looks like it will be a better year than 2016.”
Garnry can see potential bumps ahead for Europe, however, after an almost “too-good-to-be-true” dove-like performance from the European Central Bank Thursday, despite European data beginning to look more positive.
“We could see a surprise move later in the year if the ECB turns more hawkish and that could be particularly good if you are exposed to financials,” says Garnry.
Netflix shares meanwhile reversed overnight as investors took another look at the stellar Q4 result and give a bit of thumbs down to the content disrupter. Netflix — the home rather appropriately of White-House based political thriller House of Cards — has disappointed investors on the profit side spooking the share price in the process.
“Investors clearly want to see Netflix’ profitability improving but it seems that the whole business is improving,” says Garnry, indicating not too much should be read into this.
And, as we go into Trump’s big day, European and US bonds are once again pulling in different directions, reports Michael Boye from the fixed income desk in Copenhagen, with German 10-year yields once again below 0.40% and US 10-year Treasuries back to 2.46%.
And finally…
China’s GDP for Q4 came in at 6.8% which, while ahead of the consensus 6.7% expectation, was its lowest since 1990.
