A relatively quiet week in the financial markets is behind us, which were not characterized by above-average volatility. However, it is only during the weekend that the key events will take place, which may set the markets in motion on Monday.
Of the popular financial instruments, oil gained the most on a weekly basis, increasing for the sixth consecutive week. The price of a barrel of WTI oil exceeded 47 USD at some point, but on Friday afternoon it seems to be coming back below that level. As a result, the WTI price rose by less than 1.5 percent on a weekly basis. The Australian dollar also boasts such a result in relation to the US dollar. As a result, the AUD/USD also rose for the sixth week in a row to its highest level since early June 2018. Thus, more than USD 0.7500 had to be paid for 1 AUD. Since March, the Australian dollar has strengthened to USD by more than 36 percent. The scale of the increases is only comparable to what we could observe in 2009, when the world was recovering from the effects of the global financial crisis.
The New Zealand dollar was also doing very well over the past week. The NZD/USD rate reached its highest level since April 2018, approaching USD 0.71. Since the March low, the exchange rate of this currency pair has increased by more than 30 percent. The other major world currencies, on a weekly basis, slightly changed their value against the USD. The British pound is the exception. The euro, the yen or the Canadian dollar have changed their value this week by slightly more than 0.1 percent. This may indicate a possible weakening of the recent trend in which the American currency has been depreciating.
The exception is the British pound. The GBP/USD exchange rate went down by more than 1.5% this week. As a result, we saw the lowest level since the first half of November - 1.3150. The recent collapse of the GBP has increased after British Prime Minister Boris Johnson said that it is very, very likely that the UK will not have a trade agreement with the EU after the transition period. However, recent talks are ongoing in Brussels to reach an agreement before Sunday. Investors, in turn, are hedging against a further fall in the GBP/USD exchange rate, which seems to be evident in the currency options market. The volatility for weekly options has increased to the highest level of March, which shows how much the market fears political decisions.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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