20 Mar 2015
FOMC results in another liquidity flash crash – SG
FXStreet (Barcelona) - The Team at Societe Generale, comments that the USD sell-off post FOMC resulted in a intraday volatility black swan event for the EUR/USD pair.
Key Quotes
“A massive dollar sell-off took place ahead of and after the FOMC statement, in a few hours propelling the EUR/USD above 1.10 from 1.06. On a historical basis, this is an intraday realised volatility black swan event.”
“Since 2012, the EUR/USD has moved by about 200 pips in a single hour only four times. To put things in perspective, the last time this order of magnitude was observed was on 15 January, when the SNB announced the end of the CHF cap.”
“In a similar way, it is very likely that the deviation of this week has been amplified by poor liquidity conditions because the euro appreciation corrected today moving back to pre-FOMC levels (again trading below 1.07 as we head to press). Therefore, the full amplitude of the up and down EUR/USD move is about 8 figures, covered in less than one day in a tremendously volatile session.”
“The market is struggling to regain its bearings. Such an unstable equilibrium should not be overlooked as it might signal turning point conditions.”
Key Quotes
“A massive dollar sell-off took place ahead of and after the FOMC statement, in a few hours propelling the EUR/USD above 1.10 from 1.06. On a historical basis, this is an intraday realised volatility black swan event.”
“Since 2012, the EUR/USD has moved by about 200 pips in a single hour only four times. To put things in perspective, the last time this order of magnitude was observed was on 15 January, when the SNB announced the end of the CHF cap.”
“In a similar way, it is very likely that the deviation of this week has been amplified by poor liquidity conditions because the euro appreciation corrected today moving back to pre-FOMC levels (again trading below 1.07 as we head to press). Therefore, the full amplitude of the up and down EUR/USD move is about 8 figures, covered in less than one day in a tremendously volatile session.”
“The market is struggling to regain its bearings. Such an unstable equilibrium should not be overlooked as it might signal turning point conditions.”