Intra-day movements across asset classes are becoming more volatile, less predictable, and often occurring with few obvious catalysts. Did Wednesday evening’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. From a best level yesterday of 89.85 - its highest in almost 10 days - the Dollar’s index against a basket of major currencies is down around three-tenths of a point today; a pretty decent performance given the equity market has regained all its post-FOMC Minutes losses.
St. Louis Federal Reserve President James Bullard on Thursday cautioned that investors may be "getting ahead of themselves" in anticipating four rate hikes from the central bank this year. Speaking with CNBC TV, Bullard said he doesn't see the case for a 1.2% increase in the Fed Funds rate this year, adding that "one hundred basis points in 2018 seems a lot to me." He also said there was a "ways to go" with respect to sustainable upward move on inflation and reiterated the view that US GDP will likely grow between 2.4% and 2.5% this year. Fed Governor Randal Quarles, meantime, gave a speech in Tokyo saying, “The U.S. economy appears to be performing very well and, certainly, is in the best shape that it has been in since the crisis and, by many metrics, since well before the crisis… With a strong labor market and likely only temporary softness in inflation, I view it as appropriate that monetary policy should continue to be gradually normalized."
The US economic calendar is empty on Friday which might not be a bad thing given the volatility seen already in this holiday-shortened week. The USD index opens this morning in North America around 89.55; down almost three-tenths from Thursday’s high but still more than 1½ points up on where it was this time last week.