Recent Articles

Theresa May Announces Snap Election for 8th June 2017

The UK Prime Minister surprised the markets this morning by proposing a general election for 8th June, highlighting the need to “secure a strong and stable leadership” which Brexit negotiations can be built upon. Jeremy Corbyn stated that he welcomes the Prime Minister’s decision, so despite the need for a two thirds majority MP vote (under the fixed term parliaments act) there appears little to stop the vote going ahead.


As it stands, the Conservative Party has a substantial lead over Labour in the opinion polls and would therefore expect a landslide victory in June. Aside from an extension to the conservative majority in Parliament, May will be hoping that the election will show strong support for her leadership and approach to the Brexit negotiations. The timing means that negotiations with Europe will still be in the infancy so the risk of a backlash from Europe damaging confidence in May’s administration...

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The Volatility Spring

Seldom have there been as many ‘known unknowns’ as we have today. To wit, the US dropping bombs on Syria and what this may mean for stability in the Middle East and therefore oil prices, Brexit causing uncertainty for both the UK and Europe, and the French elections looking to potentially lead to a Frexit and further European uncertainty. All this against the backdrop of many other risks to political, economic, and market stability caused by recent leadership changes. Given these risks, why are the FX markets so eerily quiet, and why are FX volatilities so low?


One would think that with all of these events either happening or on the horizon, market participants would be buying options for protection, and thereby pushing up the price of these options, which is reflected in higher implied volatilities. However, we’re seeing quite the opposite.
As the charts below show, implied volatilities have fallen in...

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Trump Trade—What’s Next?

A common question asked by our readership is whether the rally we’ve seen in the dollar since early 2016 is beginning to run out of steam, or if the ‘divergence trade’, which has been driving the USD higher since 2014, is going to continue to remain in play through 2017. Our view for the dollar remains, on balance, bullish – however we would warn that risks to that view are beginning to inch higher.


Whilst a Trump victory has certainly reignited optimism in the US economy, fundamentals do not appear to be keeping up with this change in sentiment. In fact, historical divergence between these two factors are now at all time highs.


One way to measure how business and consumer optimism (‘soft’ data) stack up against fundamental indicators (‘hard’ data), is to look at the spread between market indexes which measure the two. One such measure is the data surprise index...

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Where Next?


Corporate Hedger’s Guide to Basel III


Currency Volatility – Are markets nearing an inflection point?



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