Recent Articles

Petrocurrencies Hit An Oil Slick

Back in early October of this year, all of the headlines were espousing oil and predicting a sustained rally in the slippery commodity.  Virtually no one in the oil market expected to see the 21% decline in oil prices that we’ve experienced since crude hit a nearly four-year high early in the month.  In fact, the US had just announced sanctions on Iran’s crude oil exports, which were likely to reduce supply, so the market had been feeling quite confident in their bullish view. 


Chart 1: Weekly Price of WTI



So what happened?


To answer this question, one must look beyond typical supply and demand dynamics in oil alone.  The early stages of the sell-off in oil coincided with the October sell-off in equities.  The correlation between equities and crude oil was as high as 80% depending on the equity market.  Both of these markets have been heavily impacted by a slowdown in...

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Bank of England’s Hawkish Brexit Hold

With Brexit looming, it came as no surprise to anyone that the Bank of England unanimously left its main lending rate unchanged at 0.75% last week; the bank also maintained quantitative easing at £435bn. With the headline figures from “Super Thursday” providing no surprises and the quarterly inflation report also coming in as expected, the market initially shrugged it off, GBP & Gilts remained unchanged upon its immediate release.


However, the MPC minutes and its accompanying press conference provided a hawkish tilt; BoE Governor, Mark Carney warned that the bank may be forced to raise interest rates even in the event of a disorderly Brexit. This is largely seen as unusual as the central bank would usually be expected to lower rates to encourage investment in the event of any economic shock. This saw GBP close the day almost 2% higher (albeit in a weak USD setting).


“Since the nature of EU...

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Currencies remain stable despite equity market downturn

Last week saw global equity markets continue their recent slide amid political uncertainty and the ongoing threat of tighter monetary policy from Central Banks across the globe. The Nikkei led the way with a 5.6% drop, closely followed by the S&P 500 which fell 4.1%. European indices fared slightly better (CAC 40 -3.1%, FTSE 100 -1.5%, DAX -1.1%) but still closed the week in negative territory. In isolation, these numbers aren’t too alarming, but a look at the wider picture and performance over the past four weeks highlights an ongoing theme of nervousness and risk aversion.



Unsurprisingly, the VIX (the CBOE Volatility Index, often referred to as the Fear Index) has risen sharply over the past four weeks.


The chart below shows volatility in the S&P 500 (orange, left y-axis) compared to the volatility in EURUSD (blue, right y-axis). Historically, the two have been far from perfectly correlated, but nonetheless, it is...

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