Volatility lower, Euro slips further

The close of VIX gathered a lot of attention from the media as it passed another milestone of eerily low volatility, despite being another action-packed year. Whilst at some point it is poised to break sharply higher, we note the relationship between good data and low volatility.

Everyone is paying attention to the fear index which tanked yesterday on the back of Macron’s victory and yet another record in the US markets. The risk on trade is in full swing and traders are considering the recent pullback in the European market as an opportunity. The CBOE volatility index dropped below the mark of 10 for the first time since February 2007.

It may not be a bad idea to buy some insurance for your portfolio given that the volatility is so cheap. The reason behind that is simple. Macron’s victory does not mean that we are out of the woods just yet. There are still massive challenges ahead of him and the issue of soft and hard Brexit is still very much in play. US Earnings for the Q1 were a little soft and the US GDP growth is nowhere close enough to its previous level –  let alone what Trump wants.

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