Over the past few months, there has been a sharp increase in volatility across the financial markets. This has been great for short- or medium term traders who remember the excruciatingly tight ranges from 2006. This volatility increase has been accompanied by a change in the day-to-day drivers of price action in currencies such as the U.S. dollar, euro, and the British pound.

For the past few years, being long carry seemed to be the only thing that mattered. But with 300-pip intraday swings having become the norm these days, carry trades are not working as well as they used to. This makes it extremely important to be aware of the five things that can cause short-term fluctuations in the currency market. Of course, the list of drivers is not limited to five things, but economic data, interest-rate spreads, central bank comments, stocks, and positioning are the most common triggers for daily volatility.