The volatility void – Despite increased uncertainty, global FX volatility declined this year. The main forces behind this seeming contradiction were central bank efforts to combat instability and market participants selling volatility. These may well continue in 2020, but there is no guarantee. Global currency markets are vulnerable and political shocks, in particular, could disturb the calm. Our assessment.
The macro perspective
2020: Another year in limbo? – What awaits us in the New Year? According to our most likely scenario, we have to be prepared for “more of the same.” Growth should remain positive but modest. The central banks will not change course for the time being. And politics will keep us busy. Our expectations.
FX market talk
Looking ahead: FX in the 2020s – As we enter a new decade, the balance sheets of the issuers of government-backed currencies – the central banks – look very different from just a decade ago. Not only are they much larger as a share of GDP, but they now contain a far more diverse set of assets. The old rules are being amended. We enter the 2020s with central banks apparently emboldened to tackle a broader range of problems, possibly even including climate change! And the door has opened to central banks even experimenting with digital versions of their currencies. Our outlook on the FX market in the 2020s.