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13:28:00 29-11-2023

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: dont 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. 

 

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