Just as I'm on the beach...of course!
I’m afraid this commentary is already a little dated, what started as a healthy retracement in July has now erupted into full market turmoil. In May, I spoke about the potential risk of the unraveling Yen carry trade. Yet, I did not expect the accompanying violent moves seen in several Asia equity benchmarks on Monday. However, the liquidity gap observed as traders enjoy summer holidays might be a reasonable explanation. The initial blip to realized volatility stemming from the French elections in Europe marked a more general increase in hedging activity. This resulted in several Eurex Benchmark products seeing volume increases for the EURO STOXX 50?, Banks sector, STOXX? Europe 600, VSTOXX?, SMI and KOSPI index futures and options.
The crypto segment at Eurex expands on 12 August in partnership with FTSE DAR with the listing of Ethereum Index Futures & Options denominated in USD & EUR. This will allow members and end-clients to trade the two largest coin markets within our familiar and trusted clearing house. Two more exciting new product launches will be announced in Q3, expanding our equity index suite.
I appreciate that traders will have very little time to read lengthy research pieces right now. Therefore, I’ll offer only brief thoughts. The abrupt end of a decades-old Yen carry trade feels like more than a simple market correction; cheap Japanese financing has fingers in several parts of the financial markets across multiple asset classes, not just relative value currency trading. As such, I fully expect choppy conditions for the rest of this year and so I hope our members and clients can navigate through these times with Eurex offering the right risk hedging tools.
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