Intra-day movements across asset classes are becoming more volatile, less predictable, and often occurring with little obvious catalysts. Did yesterday’s FOMC Minutes really warrant a 400 point drop in the Dow Jones Industrial Average? And if the answer is ‘yes’, then why did the same index rally 300 points the very next day on absolutely no fresh news or information? We may have to live with such swings for some time to come, and factor them into our decisions on when and how to execute our currency transactions; whether they be for hedging, investment or simply recreational cross-border expenditure such as vacations. As a good example of this volatility, after Wednesday when the AUD was the worst performer of all the major currencies we follow here, Thursday saw it back at the top of the table. Higher stocks and lower market-based measures of risk such as the VIX index help explain the AUD rally, but anyone who claims to know the precise reason that equities fell then rallied is guilty of merely fitting a story to the price action.
With that rant off your author’s chest, we note that Prime Minister Turnbull is scheduled to meet with US President Trump in Washington. This will be his fourth meeting with Mr Trump and he will be accompanied on this trip by four of Australia's six state premiers, other local leaders and 20 CEOs of the nation's largest companies. Briefing journalists ahead of the trip, an unnamed Australian official said, “The prime minister is travelling with a large delegation of business leaders and he is very keen to talk trade opportunities, while China will obviously be an important element of the talks". Mr. Turnbull is still keen to promote the Trans-Pacific Partnership, the official said, even though it is likely to receive a lukewarm reception from Trump who last year withdrew the United States to concentrate on protecting US jobs.
According to the Sydney Morning Herald, “Prime Minister Malcolm Turnbull will propose using a chunk of Australia's $2.53 trillion superannuation pool to help unlock funding for Trump's infrastructure push. "There's a very bold ambition to drive US infrastructure and Australia should be front and centre in terms of project design, build, financing and management," Trade Minister Steven Ciobo said in an interview ahead of the visit. It is certainly an area in which Australia has proven expertise but if it raises concerns about capital outflows to finance overseas projects, it could end up being another short-term marginal negative for the currency. The Australian Dollar opens in Asia this morning at USD0.7845, with AUD/NZD at 1.0685 and GBP/AUD1.7790.