It seems that most FX players are rather chuffed that a clear trend seems to have emerged in the market, but there is no doubt that there is a high degree of nervousness and a raft of rumours around.
As readers know, the euro’s rise against the dollar above 1.5000 happened at the end of the New York session on Tuesday, leading to the theory that some sharp operators targeted stops or tried to trigger various option barriers. That may have been the case, but it certainly sparked a load of buying from various model driven funds. Most don’t seem too concerned. “The trend is your friend,” one of my contacts reminds me, while another, who is in FX sales at a second-tier bank, says that customers seem to be making money. And if they are making money, they keep trading, which is presumably good for everyone.
However, despite all the gloss, there is talk of a time bomb in the options market. I am consistently told that smaller players are getting mullered; at a drink on Tuesday night with a few old mates, who happen to be option brokers, I was amazed at how much moaning and groaning there was about how difficult the market is.