This is the last column I will write until September – I’m off to France for a well-earned break. But don’t despair – I have lined up four market participants who know what they’re talking about to stimulate the grey matter of those readers still chained to their desks. I may also be tempted to break my holiday if any major news comes in during August – there is plenty of stuff brewing.
The market may be relatively quiet – a point underlined by the release of volume data this week – but it’s not a contradiction to say that FX does look in relatively good health overall. Consolidation has to come at some point, so it’s far too early to report the market’s demise. But changes are coming – as they always do in this vibrant sector.
I’m not sure whether the reduction in volumes will speed or slow change, but as I only wrote last week, it appears that the top of this cycle has been reached. And as the weeklyFiX’s banking analyst stated in May – slightly ahead of the curve it must be said – banks deserved to be downgraded because of the challenging conditions in FX (see Time to downgrade banks?).
In a way, a debate over alpha and beta separation – a debate that happened in equity fund management 20 years ago – is indicative of the arrival of currency as genuine source of return. James Binny, head of Index Research, RBS Global Banking and Markets.
While there is no doubt that a diversification of global currency reserves or the introduction of an alternative reserve currency would be momentous, they are far from being immediate risks. In our view the market is focusing on the wrong issue. By Ian Stannard, senior currency strategist, BNP Paribas.