Daily Market Update

Currency Volatility Falls Again

December 20, 2017

Currency market volatility has come to a screeching halt before the holiday weekend amid thin year-end flows and below average liquidity.

USD

The dollar has been unable to capitalize on the nearing passage of the GOP’s tax reform bill. The House passed the measure yesterday afternoon and then the Senate passed the bill early this morning. The House will have to re-vote today due to a procedural hiccup, but the President is likely to sign the bill into law by the end of the day. Tax reform has long been seen as a dollar-positive event. But over the past weeks, economists have questioned the bill’s ability to spark considerable growth. Some would argue that is why we have not seen the boost in the dollar that was expected months ago.

Bloomberg is reporting that investors are “starting to look beyond the approval of the tax-reform bill, for comments from the White House on infrastructure spending, welfare and protectionism, as well as growth and inflation data due by the end of the week.” A revision of third quarter GDP will be released tomorrow, while the PCE Deflator inflation gauge will cross the wires on Friday.

 

EUR

The Euro was unchanged against the U.S. dollar and remains mostly range bound. However, the Euro pushed modestly higher during yesterday’s session as the greenback was mostly soft. Yesterday’s move was not based on any fundamental data. German producer prices crossed the wires this morning which did not have any effect. We expect the EUR/USD pair to maintain sleepy ranges ahead of the Christmas holiday.

 

SEK

The Swedish krona was the biggest mover overnight, gaining nearly 1% before giving back most of its gains. Riksbank, the Swedish central bank, announced plans to end its quantitative easing plan, sending the currency higher. The gains were quickly reversed after the central bank said that it is “important that the krona doesn’t appreciate quickly.” Riksbank’s quantitative easing program lasted three years.

 

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