Why currency traders are serene even as Western politics gets messy
Nov 21st 2019TRADE WARS; talk of impeachment; the spread of populist politicians and hung parliaments across Europe. It is hardly surprising that an index from Policy Uncertainty, a geopolitical think-tank, puts global economic uncertainty at its highest since the gauge was created in 1997. By contrast, implied euro-dollar volatility is trading at its lowest since the single currency was born in 1999 (see chart).Derivative contracts indicate that investors think the currency pair, the most traded asset on financial markets, at $400trn annually, will move less than 6% next year. On November 14th the volatility implied by the cost of “call” and “put” options (contracts that grant the right to buy or sell at a pre-agreed price at some future date) fell below the levels of the serene days before the financial crisis in 2007.Choose us for news analysis that respects your time and intelligenceSubscribe to The EconomistWe filter out the noise of the daily news cycle and analyse the trends that matterWe give you rigorous, deeply researched and fact-checked journalism. That’s why Americans named us their most trusted news source in 2017Available wherever you are—in print, digital and, uniquely, in audio, fully narrated by professional broadcastersThis website adheres to all nine of NewsGuard‘s standards of credibility and transparency.ORContinue reading this articleRegister with an email address