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Month-end Volatility Explodes at the 4pm London Fix: What is It?

Updated: May 30




FX markets saw a burst of volatility at the 4pm London Fixing today, the final fix of the month. 


In the space of around 15 minutes either side of the fixing, DXY popped to 98.40 from below 98.20, USDCAD shot to 1.3830 from 1.3775 and GBPUSD sunk from 1.2380 to 1.2320.


Yesterday, in yesterday’s blog, I discussed how month-end flows can influence FX market price action. 


So what is the 4pm London fixing?


In the 2 minutes around 4pm London time every day, the average spot prices of all major currency pairs are taken to create a daily closing currency “fix”. This value of each currency cross is then used as the official value by which the trillions of dollars in global investments held by the investors all over the world are measured. 



Quite frequently you see volatility in FX markets ahead of the 4pm London Fix. Many in the market think this volatility is due to market manipulation by traders trying to improve their portfolio’s valuation ahead of the currency fix. 


For example, one type of manipulation is called “Banging the close”. This refers to aggressive buying or selling of currencies in the 60-second “fix” window, using client orders stockpiled by traders in the period leading up to 4pm. I.e. traders may use their insider knowledge of the positions of their clients to manipulate the value of the Fix so that they make money. 


Today’s fix was particularly volatile, given that it is the final fix of the month, so you also have to factor in month-end flows. 


Again, as I warned yesterday, be very careful trading in the final days of the month due to the market’s choppy conditions. Be even more careful trading on the final day of the month at 4pm!


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