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Business Times
12 hours ago
- Business
- Business Times
Currency traders ditching the US dollar for euro on option bets
The euro is taking on a bigger role in the global currency options market as traders skirt around the US dollar given the risks from unpredictable US policy and a global trade war. There's been a shift in trading volumes. Around 15-30 per cent of contracts tied to the US dollar versus major currencies were switched to the euro, looking at data from the Depository Trust & Clearing Corporation for the first five months of this year versus the final five months of 2024. There are also signs that the euro is being used as a haven – traditionally the US dollar's role – and for bets on big moves. While deals involving the US dollar still dominate in the US$7.5 trillion-a-day currency market, this could be early evidence that the greenback is facing greater competition as the world's reserve currency. Traders are sidestepping the US dollar after its biggest slump in years, with Europe's common currency looking like a key beneficiary as the region's markets seize on billions in government stimulus spending. 'If we're moving to an environment in which the European flow story is more important, then we could be moving to an environment in which it's euro pairs which are driving everything,' said Oliver Brennan, options strategist at BNP Paribas. The growing optimism towards European assets is also seen in the stock market. Wall Street strategists expect loosening monetary policy and increased government spending to boost the Stoxx Europe 600 Index by 3 per cent by the end of the year, handing investors annual returns of about 10 per cent, according to a survey conducted by Bloomberg. The euro, in the meantime, has rallied 11 per cent against the US dollar so far this year, hitting its highest since 2021 at above US$1.16. The US dollar has slid against every major currency, with a gauge down over 7 per cent to its lowest since 2022. That's undermining trust in US assets. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up And the slump may not be over yet. Hedge fund heavyweight Paul Tudor Jones just predicted another 10 per cent drop for the US dollar over the next year. Risk reversals, a gauge of options sentiment, are becoming increasingly negative on the US dollar against the yen, whereas they are turning less bearish on euro-yen – a 'really important signal' on the euro for Brennan. As markets question the US dollar's stability, implied volatility in the euro against the yen is looking the calmest in nearly four years relative to swings between the greenback and Japanese currency. 'The market is thinking that dollar-yen will be more volatile than euro-yen in a negative market shock, which is the opposite to how the market has traded these events in the past,' said Brennan. 'If that's the thinking, then it means the market sees the euro as more of a safe haven than the dollar.' The cost of options is also a driver, said Ben Ford, currency strategist at Macro Hive. While implied volatility generally has eased after spiking in April's market chaos, it stands at nearly 11 per cent over three months for dollar-yen, compared with under 9 per cent for euro-yen. 'The market is finding cheaper ways to express its view, especially given the view is probably for euro outperformance,' Ford said. Traders also seem to be favouring the euro over the US dollar when it comes to hedging or betting on big directional moves on the yen. That's evident in so-called 10-delta fly spreads, a gauge of demand for outsized swings, where the gap between euro-yen and dollar-yen has been steadily widening since April. Of course, the US dollar has been written off many times before. Just at the start of this year, the euro was languishing near parity with the greenback, with many investors certain the common currency's value would fall below its US peer. Instead Trump's April's tariff announcements saw investors dump US dollar assets. While US stocks have recovered since then, the dollar risk premium remains elevated, and it may require a return to US exceptionalism to reverse the trend, according to Tanvir Sandhu, chief global derivatives strategist at Bloomberg Intelligence. Meanwhile, the European Central Bank's President Christine Lagarde has called on policymakers to seize the moment and increase the euro's global profile. French officials were also reported to be lobbying for additional measures aiming at raising the currency's importance. 'There's a push and a pull – the pull has been that there's potentially more safe assets to buy in Europe and more growth expectations in Europe,' said Brennan. 'And the push has been tariff uncertainty, risks to US exceptionalism, and the macro story.' BLOOMBERG
Yahoo
05-06-2025
- Business
- Yahoo
Market Minute 6-4-25- Swticheroo in Play as Global Stocks Hit Highs, US Lags
Markets are relatively quiet so far, with stocks, gold, and crude oil all mostly flat. Treasuries are rallying modestly, though, while the dollar is dipping. We have a switcheroo in major markets. Led by strong performance in non-US equities, the MSCI All-Country World Index just tagged 888.24 – topping its previous February peak of 887.72. The Stoxx Europe 600 Index is beating the S&P 500 by the widest margin on record. In the Americas, all major indices are outperforming the S&P 500 handily, with benchmark indices in Canada up 6.8%, Brazil up 14.3%, and Mexico up 16.4%. To get a FREE copy of the complete MoneyShow 2025 Top Picks Report, click HERE.) This chart shows the performance of the iShares MSCI ACWI ex US ETF (ACWX) compared to the SPDR S&P 500 ETF Trust (SPY). The former holds more than 1,700 non-US stocks, with the highest weighting in names like Taiwan Semiconductor Manufacturing (TSM), Tencent Holdings Ltd. (TCEHY), and SAP SE (SAP). As you can see, ACWX has gained just under 15% so far in 2025, compared with only 1.7% for the SPY. This is a big week for job market data – and today's ADP number didn't exactly excite Wall Street. The private payroll company said the US economy added just 37,000 jobs in May. That was down from 60,000 a month prior and FAR below the average forecast of 115,000. Official Labor Department numbers are due out Friday morning. See also: CTRI: A Utility Play That Just Landed Large, New Contracts In other news, US-China trade disagreements keep festering. President Trump called Chinese President Xi Jinping 'extremely hard to make a deal with' in a social media post overnight. Hoped-for talks between the two leaders still haven't happened. Meanwhile, China's crackdown on exports of rare-earth metals is threatening manufacturers here in the US. Auto companies are particularly vulnerable, especially those who are titling more toward Electric Vehicle (EV) production. Those vehicles need rare-earth magnets to function and sourcing them from China has become much more difficult. More From SPX: Yes, We Could Finish 2025 at 6,600 Given Earnings, AI Growth Earnings, Jobs Data to Drive Next Market Moves Market Minute 6/3/25: Wet-Blanket Forecasts Weigh on Markets
Irish Independent
05-06-2025
- Business
- Irish Independent
Markets hover near all-time high despite latest tariffs drama
In Europe, shares in Germany's DAX index hit a record high after the new coalition government there approved a €46bn package of corporate tax breaks as part of a push to revive economic growth, and ahead of an expected interest rate cut on Thursday from the European Central Bank. The Stoxx Europe 600 Index of European shares closed up 0.5pc after it pared some earlier gains following weaker-than-expected US jobs data. European shares are increasingly outperforming the US, closing what had been a yawning valuations gap. US stocks are close to their own highs, having recouped the 20pc suffered in April during the initial phase of the reaction to Donal Trump's tariffs. While the White House has rowed back on its most extreme tariff policies, it did pull the trigger on Wednesday on a huge 50pc tariff on imports of steel and aluminium, double the size of a tariff first announced in February. The steel levy, imposed for supposed national security reasons, is outside the scope of a US court that last week ruled much of the Trump tariff regime was illegal. The decision to push ahead with the higher rate came after the White House was stung by the new insult that Trump always chickens out (TACO). Canada, the biggest exporter of steel to plants including in the US industrial belt close to the border, will be worst hit. The MSCI index made up of a basket of stocks from across the developed world – and therefore a good guide to confidence in the global economy – touched an all-time high on Monday and remained close to it on Wednesday. In Dublin, the Iseq 20 index of Irish shares hit a high on May 29, and remains close to it. The numbers point to investors increasingly looking through the tariff threat, despite the noisy policy shifts, at least until next month when a number of 90-day tariff 'pauses' are due to roll off. Talks – including between the EU and US, Canada and the US, and the US and China – all aimed at influencing the July deadlines are currently taking place. 'As the market continues to move higher, I think investors are simply saying look, the trend is your friend, and just like white-water rafting they will let the market take them where it wants to go,' said Sam Stovall, chief investment strategist of CFRA Research in New York. 'The markets are going through some sideways movement until we get into July because then we'll have a better read on what kind of an impact tariffs have had on Q2 economic growth and earnings, and give a better idea as to what might happen for the remainder of this year.'
Irish Independent
27-05-2025
- Business
- Irish Independent
Stock markets rebound after latest Donald Trump tariff U-turn
The picture was much the same across Europe after Mr Trump said he would extend a deadline for talks into July. Markets in London and New York were closed for a long weekend. The Stoxx Europe 600 Index gained 1pc. In Ireland, the Euronext Dublin was up slightly less, with the Iseq 20 index of leading Irish shares gaining 0.92pc, with broad gains across sectors. The rebound came after stocks fell in Europe on Friday when Mr Trump threatened a shock 50pc levy on the EU starting June 1. He had complained that the EU lacked urgency in trade talks and unfairly targeting American companies with lawsuits and regulations. The rebound on Monday came after he agreed to push the deadline for a deal to July 9 following a phone call with European Commission president Ursula von der Leyen. "This is nothing more than the usual 'threat and retreat' that has been the modus operandi of this tariff tennis we have witnessed since the start of the year," said Florian Ielpo, head of macro research at Lombard Odier Investment Managers. "European valuations outperforming in this context and the EUR progressing vis-a-vis the dollar are yet more signs that European stocks continue to look attractive in this high-uncertainty environment." The EU had been slated for a 20pc tariff under the reciprocal rates announced in April, and a temporary pause took the rate down to 10pc through July 9. Ensuing expectations for a trade deal lifted sentiment, with the Stoxx 600 bouncing 18pc from an April low through its recent high last week. Cyclical stocks had a sharp rally. "'Less bad news' has been lifting valuations, but now we need 'more good news' to fuel this rally – good news on both the fiscal front and the growth front," said Mr Ielpo. Among individual movers, Thyssenkrupp AG advanced 8.3pc after it said it planned to become a strategic holding company with independent business segments.
AU Financial Review
26-05-2025
- Business
- AU Financial Review
ASX to edge higher, European stocks rise
Australian shares are set for a modest opening advance after the EU and the US agreed to accelerate trade talks to avert a potential tariff war. The Stoxx Europe 600 Index closed up 1 per cent, paced by industrial goods and autos. The UK stock market was shut for a holiday as were US markets. European Commission President Ursula von der Leyen secured a one-month reprieve from US President Donald Trump who on Friday threatened the EU with a 50 per cent tariff hit to press for trade concessions. Market highlights ASX futures are pointing up 17 points or 0.2 per cent to 8408. All US prices are as of 2.15pm New York time. Today's agenda It's a very quiet day for data with European May consumer and economic confidence at 7pm and later in the evening US durable goods for April and the Conference Board's May consumer confidence. Top stories Labor poised to approve NW Shelf gas project | The Albanese government has given its strongest signal yet that it will approve Woodside's long-delayed gas development. | The ex-Rothschild deal maker has become a crusader against bad boards. Depending on who you ask, he's either shareholders' best-friend or a grandstander. Chanticleer: Saving Healthscope won't cure our sick private health system | Most of Healthscope's hospitals will be picked off by new buyers but without at least an eye to the bigger picture, other private hospitals could end up in the sick bay. | While the company says it has 10 prospective suitors, Health Minister Mark Butler has flagged that overseas private equity firms are unacceptable hospital owners.
