It is no surprise to anyone that the FX markets are dead right now... We are glad when the EUR moves 50 points these days. Gone are the days of the 300-500 point daily swings of 2011 - at least for the foreseeable future anyway. In a year such as this one so far, it is beyond critical to adapt our horizons in a realistic way.
This year has been so against consensus it is crazy. Going into the year, everyone was expecting the USDJPY to rally towards 110, the Nikkei to hugely outperform and Global rates to be rising, and fast. Yet none of these have happened. USDJPY is 4% lower, the Nikkei is a huge -11.15% down (in USD terms) and US 10's are 40bps lower. So it is fair to say that this year has been a tough one, one of the toughest in terms of alpha generation since 2008 in my opinion.
Here is JPM's FX volatility index.
As we can see it is very low, and still heading lower, and given the lack of any huge events its not a surprise.
In a previous article here I discussed how to use Volatility to aid in trading, and this article, while similar will focus on how we need to adapt to low vol environments, giving a few tips I've learnt from my times trading both high and low vol per…