Euro snoozes through sleepiest week since launch 20 years ago

Currency lodged in tight range thanks to steady monetary policy and trade uncertainty

This week is on track to be the sleepiest for the euro since the currency was founded.

Over the past five days, the difference between its highest and lowest points against the dollar has been a mere 0.38 per cent, marking the quietest stretch for the euro since it was introduced in January 1999, Refinitiv data show.

Thanksgiving week is typically quiet for currencies trading as Wall Street hunkers down for turkey feasts and relaxation. But this week’s lack of activity echoes a low-volatility trend that has taken hold in several major currencies this year. Six of the quietest 20 weeks on record have all been this year.

The euro-dollar pair is the most actively traded on the foreign exchange market, accounting for some $1.6tn in turnover — 24 per cent of total volume — on an average day, Bank for International Settlements data show. But the euro’s range for this year, $1.0877 to $1.1570, is the lowest on a percentage basis in the history of the currency.

In options trading, where investors hedge against or speculate on moves in currencies, the situation is similarly tame. Expectations for volatility over the next month for the euro are at the lowest on record, according to Bloomberg data.

“The market has never before expected such small fluctuations in the euro-dollar spot [price] over the coming months as it does now,” said Thu Lan Nguyen, analyst at Commerzbank.

Ms Nguyen said cautious optimism over US-China trade talks has meant “markets are becoming increasingly relaxed”. She added: “Only an unexpected escalation of the conflict, which makes an increase in tariffs likely, is likely to jolt the market out of its lethargy.”

Barclays analysts noted that in addition to “uncertainty” over the Sino-American trade situation, a “lack of new signals from global data and monetary policies are likely to keep market conviction low” over the next several weeks.

The release on Friday of preliminary eurozone inflation figures highlights the lack of enthusiasm across currencies trading desks. The report, which was released at 10am London time, is generally one of the key economic events of the month because the European Central Bank explicitly targets inflation of close to but under 2 per cent.

The data showed the rate of price growth accelerated to 1 per cent this month, up from 0.7 per cent in October and exceeding economist expectations of 0.9 per cent. However, traders watching a chart of the euro could be forgiven for missing the tiny move in the currency, which slipped 0.05 per cent during the following hour.

“As the economic environment is unlikely to be strong enough to see inflation move sustainably towards 2 per cent over the course of 2020 . . . the forward guidance in place since September could keep ECB president Christine Lagarde’s first full year in office somewhat dull”, said Bert Colijn, senior economist at ING.