Via HSBC note on G10 FX, with why volatility is set to expand (this in summary)
a crucial consequence of the FOMC turning more "data dependent":
- important impact from this change in stance is that the USD will become more data dependent, and hence will become more volatile in nature
In 2018, the Fed was on autopilot, and therefore so was the USD.
- This has led to low volatility and narrow ranges in USD pairs.
- Now the Fed is changing and the reaction of the USD is set to change as well.
- Low volatility in G10 FX looks sets to increase and the well-defined ranges that were formed in 2018 look likely to break out.
- High volatility tends to be associated with broader risk-off type market behaviour.
This should favour the USD and the JPY, in our view, given these currencies' longstanding safe haven characteristics.
(bolding mine)
