Instead, I was going to try and give the column a Sgt Pepper theme this week, as it was 40 years ago today that the Beatles’ seminal album was released. But even with a little help from my friends in the Euromoney office, I couldn’t really get any of the album’s song titles to fit my headlines.
Though they say another day, another dollar neatly describes the vibrancy of the FX market, these days we’d be better off pointing out that history often repeats itself. Just like last year, activity has dwindled and the market appears to have sailed into the summer doldrums rather early. If lessons have been learnt, traders will be battening down the hatches now and trying to make sure that they don’t pee their profits down the toilet – as many did in the latter half of 2006.
The options market illustrates just how little is going on. Implied volatilities are on the carpet, with euro/dollar being quoted at historical lows (see graph).
Graph shows 1-month and 1-year implied vols for past 5-years. Source: SuperDerivatives.
One of my muckers reckons there’s a generation of option dealers who have never seen double-digit vols.