Euro volatility is set to remain higher than the decade average this month on persistent worries of a messy Greek default, a Reuters poll found on Wednesday. Uncertainties over a new round of monetary stimulus in the United States and in Europe may also drive sharp currency moves in March, even after the injection of more than a trillion euros by the European Central Bank since December.
The volatility prediction is based on the standard deviation of forecasts in the March Reuters foreign exchange poll together with actual one-month annualised volatility last month, which has a reliable predictive track record. According to the poll, euro volatility is expected to rise to 13.4 percent in March from the actual 8.7 percent seen in February. The decade average is 10 percent.
"Euro volatility seems destined to be determined by the success or otherwise of the Greek PSI (private sector involvement) and hence the entire second Greek rescue package," said Raymond Attrill, head of currency strategy at BNP Paribas.