Constructive on USD as we head towards the Fed lift-off – Westpac

By FXStreet FXStreet (Delhi) – Richard Franulovich, Research Analyst at Westpac, suggests that the Fed meet is going to be a momentous day certainly but few surprises likely, OIS pricing for at 82% while the forecasting community is nearly unanimous, 92% of analysts expect a hike.

Key Quotes

“Parts of the statement will be moot after lift-off and need reworking, i.e., “…whether it will be appropriate to raise the target range at its next meeting“, and, “…the committee reaffirmed its view the current 0 to 1/4% target range remains appropriate…”.

“Risks may be upgraded from “nearly balanced”. Gradualism will no doubt be stressed and the statement may be tweaked to note further hikes will depend on “actual progress” on inflation vs “expected” progress toward 2%, a subtle but significant shift noted by Yellen recently. Yellen likely to strike a cautious tone on subsequent hikes, repeating the view that the long run neutral Funds rate has fallen and that rates will remain accommodative for a long time.”

“The infamous dot plot should convey much the same, the long run neutral rate (3.5%), likely to fall again, probably 25bp. A median 4 hikes next year (to 1.375%) and 5 in 2017 probably do not change much. Far …read more

Source:: FX Street