CME Group FX Volumes Rise 20% as FED Speculation Reactivates USD Volatility

Volatility finally began to warm up during August. Reacting to the FX prices, traders have become more active, sending futures

CME_full_logoAmong FX brokers, the World Cup was attributed to partially causing volumes to be muted during both June and July of this year. More importantly was the continued decline in volatility of major currencies to 25-year lows. With both the World Cup no longer taking over people’s past times, as well as a small bump in volatility thanks to renewed monetary easing speculation, August FX volumes are so far appearing to have shown a strong rebound from earlier in the summer.

Earlier this week, it was reported that KCG Hotspot average daily volumes (ADV) rose 20.5% MoM. Similarly, at the CME Group during August, combined FX futures and options ADV increased by 20% from July to over 667 thousand contracts. The average daily notional value of FX contracts traded in August was $80 billion. In addition, the CME announced that FX open interest hit an all-time high of 2.4 million contracts at the end of the month.

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On a total basis, slightly more than 14 million FX contracts were traded in August. However, ADV were still well below the same period in 2013, 10% below 2013’s level of 745 thousand contracts.

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Among individual currencies, ADV of euro contracts increased 26%. Volumes have risen due to renewed speculation among traders about potential changes of monetary policies from both the ECB and FED. While the US dollar has been underperforming other major currencies for the first four months of the year, the Dollar Index reached a 13-month high this week and broke out of its previous ten month range between around 79.00 to 81.50 to a recent 83.00. On the other hand, speculation that the FED may be on its way to increasing interest rates in 2015 has diminished interest in the carry trade. This was seen in both the Aussie and Kiwi underperforming activity of other major currencies.

While not composing a large percentage of overall CME FX volumes, the Brazilian real experienced the greatest change in its trading volumes. The real as well as Brazilian equity prices were affected by the death of presidential candidate Eduardo Campos in a plane crash. A as a result of the volatility, total Brazilian real futures volumes rose 319% from July to 102,141 contracts traded during August.

CME Group FX August 2014 Volumes
CME Group Total FX August 2014 Volumes


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