Despite the fact that the US dollar and the euro are the most traded currencies in terms of shares of average daily turnover (2013, BIS), my analysis suggests that foreign exchange rate (FX) market trends are usually driven by other currencies. Most notably, ‘commodity’ currencies (such as the Australian dollar and Mexican peso) and ‘carry-trade’ currencies (such as the Swiss franc and Japanese yen) tend to be the main drivers. In contrast, sterling typically does not often drive currency movements – FX strategists often consider that it is rare for sterling to be ‘the story’ amongst the speculative community in the FX market. But this is not always the case. This blog post zooms in on a selection of sub-periods to show when particular currencies, including sterling, became ‘focal’.
John Hill and Jamie Coen.
The financial system is complex and highly interconnected. Indeed, interactions between agents are key to its functioning. But these interconnections have the potential to turn small shocks into systemic crises. Understanding the complex nature of these interconnections is important, but can also be difficult. In this post we introduce new tools designed to analyse the financial network and help analysts build a better understanding of risks posed by interconnectedness.
Like Sooty, the BBC’s yellow bear loved by generations of British children, central banks should wave the ‘magic wand’ of data visualisation over their large, granular or complex data sets, in order to gain further insight into the patterns and relationships contained within them. This blog draws on some examples to highlight how different visualisation techniques help not only the communication of data, but more importantly, how it can aid data exploration, analysis and understanding.