The two factors driving fluctuations in currency markets

CURRENCIES

Foreign exchange markets are at a significant juncture, with currency misalignment likely to increase in the second quarter, writes Neil Staines, head of FX trading at The ECU Group.

When assessing the current macroeconomic backdrop from a currency perspective, there has been a considerably lower than normal participation rate in foreign exchange markets, with intermittent periods of sharp movements followed often by periods of low volume, and tight ranges. This could be the ‘calm before the storm’, a precursor to some significant corrections in the baseline levels of many foreign exchange rates. For many months, it has been the first week of every month which has seen the greatest concentration of activity and interest (and thus movement) in currency exchange rat...