Bond markets are set to stay in the driving seat for FX markets

Despite a relatively light economic calendar this week, FX market volatility hasn’t been absent. Instead of interest rate announcements and economic data releases, volatility in currency markets has been driven by the continuous repricing of interest rate, inflation, and growth expectations in global bond markets. Compounding the FX impact from fixed income markets has been the string of comments from ECB, Fed and Bank of England policymakers towards the back-end of the week, which has kept pricing in interest rate markets liquid. Next week, with the Fed set to enter its blackout period from midnight eastern time on Saturday ahead of its meeting on May 4th and the Bank of England communications also going quiet ahead of its May 5th meeting, focus quickly shifts back to the economic data, formal interest rate announcements, and the results of the second-round French Presidential election.

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Authors: 

Simon Harvey, Head of FX Analysis

Ima Sammani, FX Market Analyst

Jay Zhao-Murray, FX Market Analyst

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