ECB Bulletin: Implied forex volatility at unprecedented levels recently

The ECB says forex volatility has been at unprecedented levels in recent weeks, possibly because of the ongoing recession and investor nervousness.

The ECB monthly bulletin reads “Implied foreign exchange volatility has continued to remain at unprecedented levels in recent weeks” adding “a possible explanation may relate to the length and depth of the ongoing recession which is highly synchronised across the globe.”

The ECB says countries who recover first will likely see their currencies strengthen, the bulleting stating “Market participants may be delaying their positioning in the currency markets until consensus expectations are formed about which economies will be first to recover from the global downturn. As investments will likely flow towards such areas, their currencies are likely to eventually strengthen.”