Not every pip in market movement has to be explained with the news flow – Commerzbank
|Ulrich Leuchtmann, Head of FX and Commodity Research at Commerzbank, highlights that sometimes the market moves on its own accord.
Not everything can be explained
The FX market is a collection of subjects who do nothing but guess what the other subjects might be doing. Sometimes there are periods when their actions cancel each other out and as a result, nothing happens. And sometimes there are periods during which moves are reinforced by herd behavior. Skeptics (and economists) call it a ‘speculative bubble’. I avoid the term, because ‘bubble’ sounds as if it might burst, at which point the USD weakness would disappear. That does not have to be the case. I, therefore, prefer ‘self-reinforcing market movement’.
Not every pip in market movement has to be explained with the news flow. When I was a young analyst, I sometimes had this aspiration. But by now I have realised that such efforts are futile. For all parties involved. Sometimes the market moves on its own accord.
In other words: don’t always rely on the ‘explanations’ that you read about exchange rate moves. After the event, we analysts often find a sack of rice that fell over somewhere and can ‘explain’ this move or another.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.