Dollar Volatility Coming Your Way

Lior Alkalay - Contributor - Forex

Would you say that Janet Yellen was some sort of silver tongued wizard? After this week’s rate decision the answer might be yes, because otherwise it’s close to impossible to explain how the Fed Chair was able to come across as sounding both hawkish and dovish in the same speech. On the one hand, Yellen dropped the word “patience,” suggesting that interest rates could rise within any future meeting, with most Fed members in favor of a rate hike in 2015. On the other hand, Yellen pointedly stressed that rates would rise slower than previously anticipated and outlined her concerns on low inflation and wage growth. This “impossible” combination of hawkishness and dovishness resulted in dazed and confused markets, and investors it seems are having difficulty deciding which way the wind is blowing at the Federal Reserve, with the hawks or with the doves. Given that, they’re collectively trying to gauge whether the dollar is now a buy or a sell?

Choppy Times Ahead

Soon after the Fed statement was made, it was a stampede of sellers, bulls running out of dollar positions, and the greenback in a nose dive, shedding more than 2% in less than 3 hours. Yet the following morning, as trade opened in London, everything flipped once again; the dollar was higher and ended up more or less where it is was prior to the Fed decision. Continue reading "Dollar Volatility Coming Your Way"