FOMC: No change in policy expected, but they will want to keep June ‘live’ - SocGen

Kit Juckes, Research Analyst at Societe Generale, suggests that the FOMC meeting isn’t expected to result in a policy change, but they will want to keep June ‘live’ and despite softer data, a slightly hawkish bias is likely.

Key Quotes

“Our rates strategists favour a bearish bias once the current event risk is out of the way, because the market only prices three hikes between now and the end of next year. The question is how hawkish the Fed will be. If they are true to form, they will be nudging expectations rather than acting forcefully and that will be more risk-friendly than dollar-friendly.”

“USD/JPY should find further support (though Japanese holidays limit moves for the rest of this week), and higher-yielding currencies are unlikely to suffer. Importantly, absent worse inflation data, the Fed is unlikely to sound hawkish enough to stand in the way of a further move higher in EUR/USD, possibly testing 1.10 before the second round vote on Sunday, and breaking higher next week.”