We reach the end of what has been a pretty dramatic month for FX and not just because of developments on the Swissie. Whilst over-shadowed, other central banks have also been driving FX rates; not only the ECB, but also in Canada and New Zealand. We’ve got more to come, today from Russia and next week from the RBA in Australia. In Russia, the Rouble has been edging ever closer to the 70 level on USDRUB, but interest rates are already at crippling level and it’s the exception rather than the rule that ever rising interest rates resolve a currency crisis, because they end up proving so crippling for the economy. That said, after the last meeting when rates were hiked from 10.5% to 17.0%, it pays to be on guard for another surprise and volatility today when the rate decision is announced at 10:30 GMT.
We also see talks starting between Greece and the Eurogroup today. Both sides are sticking fairly firmly to their respective stances, so this could be the start of what will be a process that lasts several weeks. There are naturally big costs on both sides to giving ground. For currencies, there is natural tendency to see greater volatility on the last day of the month as investors square positions and re-balance portfolios to benchmarks. Beyond today’s volatility, there is still scope for the euro to stage a short-term recovery after the recent lows, partly owing to the fact that EURUSD remains in over-sold territory after the recent sharp losses. The Aussie is also worth watching into the RBA meeting next week, and after the push to new lows for the year at 0.7720.