EUR/USD: Draghi, Low Volatility, & Calm Market Behind ‘Outsized’ Move – BTMU

Draghi sent the euro up[1]. And then some ECB sources downplayed Draghi[2]. What’s next? Here is the view from BTMU:

Here is their view, courtesy of eFXnews:

BTMU FX Strategy Research notes that the most common question fielded yesterday was whether the comments from ECB President Draghi were consistent with a 1.2% surge in EUR/USD.

“Yesterday we chose to highlight the fact that our equally- weighted G10 FX volatility index had dropped by more than one standard deviation from the average going back to 1999 and perhaps yesterday’s sharp move was more a reflection of positioning with market participants caught out,” BTMU argues.

“Low volatility and calm market conditions breathes complacency and can result in out-sized moves relative to the fundamental explanation behind the move. 

However, looking through the comments we would also acknowledge that there was certainly a greater emphasis on highlighting the positives in contrast to the ECB monetary policy press conference when perhaps the focus was more on playing down the progress in order to diminish any exaggerated move,” BTMU adds.

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