Greenback roars back

Price action in the FX space has been choppy this week as investors looked for direction by juggling the FOMC meeting minutes and Fedspeak.

Source: Bloomberg

The US dollar recovered some ground after comments from Fed vice-chair Stanley Fischer, James Bullard and Lacker were skewed to the hawkish side. Additionally, unemployment claims fell and came in better than expected, helping fuel the USD hawks.

Bullard feels the Fed should begin tightening in late Q1, while Fed vice-chair Stanley Fischer said he expects lift-off around the middle of next year. The exact timing will be data-dependant. There will be more Fedspeak later today, with Plosser, Fisher, George and Lacker on the wires. There is room for more USD volatility as a result.

Risk-off hurts the AUD

With markets mostly risk-off and with the USD strengthening, AUD/USD reversed after having traded as high as $0.8900. This was fairly swift and saw AUD/USD drop back below $0.8800.

A sharp drop off in home loans data didn’t help the situation after the RBA’s recent efforts to rattle property investors. Choppy price action is likely to continue as we head into the weekend. Volatility for the pair will probably come from the USD side.

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