Risk animals series: Elephant in the room

In the context of currency markets, an "elephant in the room" risk event refers to a significant and potentially disruptive event that may be looming but is being largely ignored by investors. These risk events can cause sudden and significant movements in currency exchange rates and can catch market participants off-guard.

We tend to see this from time to time in the FX market. The newest?elephant in the room?is the high inflation trend. Central banks ignored that trend for a long time and stated that such an inflationary environment was temporary, however they later agreed that this was a mistake and started increasing interest rates. Investors who??ignored such high inflation failed to respond properly to the interest rate increases hike and the EURUSD movement when the rate fell by 15 percent.?This in turn can seriously hurt business profits.

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