VIX Sends Pound to US Dollar, Australian + New Zealand Dollar Exchange Rates Stronger; VIX Slumps, Share Markets Escalate

August 15, 2014 - Written by John Cameron

STORY LINK VIX Sends Pound to US Dollar, Australian + New Zealand Dollar Exchange Rates Stronger; VIX Slumps, Share Markets Escalate

Currency News UK: This week saw the VIX send the Pound Sterling to Dollar, Australian Dollar & New Zealand Dollar exchange rates higher; VIX slumps and the share markets appreciate - Global share markets recorded another day of gains yesterday, with the benchmark S&P 500 index in the United States trading up by almost a third of a percentage point during after-hours trading in London.

Meanwhile, Frankfurt’s Dax index climbed following a wobbly start to close up by 0.29%.

The strengthening appetite for risk amongst investors was illustrated by another significant loss for the VIX ‘fear index’ which gauges the volume of protective ‘put’ orders placed by nervous equities traders in the States.

The FX markets take the following shape today:

- The pound to australian dollar exchange rate (GBP/AUD) is 0.07 per cent lower at 1.79019.
- The pound to euro exchange rate (GBP/EUR) is 0.1 per cent lower at 1.24755.
- The pound to dollar exchange rate (GBP/USD) is 0.04 per cent higher at 1.66917.

VIX recorded its sixth straight session of losses and had traded down to just above the 13.0000 threshold by the middle part of the American equities session; this represented its lowest reading since 29th July.

The shift out of safe-haven assets by market participants during the past week has been precipitated by twin drivers – a generalised easing of geo-political risk and continued concerns that all is not well with the American labour market.

The early part of the month brought considerable nervousness from investors regarding the tinderbox situations in Ukraine, Gaza and Iraq.

Tensions have abated considerably in each of these theatres yesterday – both sides continue to observe an uneasy truce in Gaza, while yesterday’s session brought further evidence that a Russian convoy stationed on the border with Ukraine does indeed contain aid and not weapons. Meanwhile, Wednesday night brought the news that US policymakers now consider the humanitarian situation on Mount Sinjar not sufficiently grave to warrant any meaningful intervention.

Turning to the US, yesterday afternoon’s weekly employment data revealed that the level of Initial Jobless Claims had climbed to its highest level for some six weeks at 311,000 versus an expected an expected 295,000.

The implication of this result, in the minds of investors at least, was that the US economic recovery is not yet strong enough for the Federal Reserve to hike interest rates. The thought of continued easy money further supported investors’ sentiment and the upshot saw the Pound climb a little against the Buck, sending the GBP USD exchange rate up to as high as 1.6696 during late trading.

Elsewhere, the improvement in risk appetite also favoured the Commodity Dollars on the day, sending the Pound Australian Dollar and Pound New Zealand Dollar exchange rates down to 1.7899 GBP/AUD and 1.9614 GBP/NZD respectively.

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