FX spreads continue to widen during New York trading hours

 

Volatility in the FX markets is increasing during New York trading hours (17:00 to 21:00 hrs BST), as indicated by widening spreads for the period of 20th May to 10th June.

The latest data from FXLIQUIDITY, a new free analytics service for the FX market, also shows that spreads in G10 currencies continue to tighten, with improvements seen in most currencies during London trading hours.

Of 11 key currency pairs analysed, liquidity in AUDUSD has fallen 6%, placing it alongside NZDUSD as the least liquid pair.

FXLIQUIDITY harnesses CLS’s robust, aggregated FX market data, MUFG’s aggregated FX order book data and Mosaic Smart Data’s advanced analytics software.

The recent data shows analysis of liquidity, volume and spread changes in 11 of the world’s Major, Latam, APAC and EM currencies – from 20th May to 10th June 2020. This has been compared to a pre-COVID-19 baseline of 1st June 2019 to 20th February 2020, and a COVID-19 peak of 21st February to 20th March 2020.

The analytics show new insights in comparison to the previous report:

  • Spreads in New York trading hours (from 17:00 to 21:00 BST) have widened since the previous period (see spread elevation matrix).
  • G10 Spreads have continued to tighten (28% elevated vs. 30% for the previous period) with improvements seen across most currencies during London hours.
  • Liquidity has slightly improved with G10 currencies now at 72% of pre-COVID-19 levels and emerging markets at 66% (up from 71% and 65% respectively).
  • Volumes continue to rise, with EURUSD up by €3.5bn on average per day, bringing it 11% above the pre-COVID-19 average (up an additional 2%).
  • The volumes in AUD continue to increase but NZD has fallen; AUDUSD is at volumes of 56% above pre-COVID-19 levels while spreads for the recent period are on average 44% wider than pre-COVID-19 levels.
  • In liquidity terms AUDUSD remains the directional outlier with a decrease in liquidity of 6% compared to the previous period (now at 57% overall), placing the overall score at the bottom of the currencies analysed, alongside NZDUSD.

Matthew Hodgson, CEO and Founder of Mosaic Smart Data, said: “Volatility has increased recently during New York’s main trading hours, with widening spreads across key currency pairs. Volumes are continuing to rise, with EURUSD increasing by €3.5bn on average per day, taking the pair to 11% above its pre-COVID-19 usual level. However, AUDUSD spreads are 44% wider than before the global pandemic, and liquidity in this pair has also dropped by 6%. Mosaic Smart Data will continue to collaborate with CLS and MUFG to provide this free analytics service, providing greater transparency over currency moves for the FX community.”

Spread Elevation Matrix: Shows the ratio% of spread levels during recent period compared to pre-COVID-19 period.

To see all the graphics with Natural Language Generation (NLG) commentaries, see https://mosaicsmartdata.com/fxliquidity/