Euro volatility at its highest level since March 2020

7 Jul 2022 , 02:16 PM

On Thursday, the euro made a small gain thanks to increased risk appetite, but it is still close to hitting a two-decade low as rising energy costs stoke concerns about an impending recession.

Implied volatility in the forex market, which measures market jitters, was still at 11.2%, its highest level since late March 2020. This is because investors are watching the euro/dollar parity. Stocks managed to post modest gains as traders considered the possibility of a recession and a suspension in interest rate hikes.

After plunging to a two-decade low on Wednesday at 1.01615, the euro rose 0.1% to 1.019. The dollar index, which compares the value of the dollar to six other currencies, decreased 0.1% to 106.97, retreating from Wednesday’s high of 107.27, a level not reached since late 2002.

As copper prices increased, currencies connected to commodities grew stronger. After the red metal dropped to its lowest level in over 20 months on Thursday due to heightened recession fears, some investors started to return to the market.

After recently falling to its lowest level since May 2020 at 0.6762, the Australian dollar rebounded 0.6% to 0.6821 against the US dollar. The Swiss franc was trading at 0.9872 against the euro, which was about where it has been since 2015.

Early this week, speculation that the Swiss National Bank (SNB) will shortly tighten its monetary policy was fuelled by inflation exceeding the target range of 0-2% for the fifth consecutive month. It increased its policy rate last month for the first time in 15 years.

The SNB has made it clear that it is ready for the Swiss franc to rise in order to curb imported inflation. After hitting a more than two-year low the previous day, the British pound strengthened against a declining dollar on Thursday as Prime Minister Boris Johnson held onto his position despite the resignation of many important cabinet members.

Sterling increased by 0.3% to 1.1935 and was unchanged at 85.48 pence as compared to the euro.  Analysts claimed that rather than
Britain’s political unrest, the pound was mostly fluctuating due to larger economic worries of a worldwide recession.

Bitcoin increased 0.2% to $20,413 at the most recent price, Ether decreased 0.9% To $1,174