Volatility tends to rise in the run-up to Fed meetings

Current market commentary

The last two weeks have been marked by increased volatility in the stock market, as expected and in line with the recent higher volatility going into the big option expiry week. Options are often rolled these days, leading market makers to unwind or adjust their hedges in turn. However, volatility is likely to remain elevated at least until the Fed meeting this Wednesday, for which some market participants are already expecting a concrete announcement of the schedule for the curbing of bond purchase programs. However, the recent somewhat disappointing US labour market report as well as mixed US economic data should have made this less likely, at least for the September meeting. Thus, it may be that the typical pattern will also prove true at the Fed meeting. Before the Fed meeting, investors are nervous, volatility rises, then the Fed surprises dovishly and volatility declines again.

Short-term outlook

In the next two weeks, central banks will be the focus of attention. On 22 September, the Fed will hold its monthly meeting and on 23 September, the Bank of England will. At the end of September, the ECB Central Bank Forum and the EU Parliament hearing of ECB President Lagarde will take place. The German federal elections will also take place on 26 September. China's National Day, and thus the start of National Day Golden Week, falls on 1 October. In terms of the economy, the focus this week is likely to be on US housing market data and the preliminary Purchasing Managers' Indices for the Eurozone, the UK and the US for September, which will be published on 23 September. This will be followed on 24 September by the ifo Business Climate (Sep.) for Germany. The following week will see retail sales (Aug.), consumer confidence (Oct.) and inflation data (Sep.) for Germany, as well as consumer confidence (Sep.), new orders (Aug.) and the ISM index for the US.