FOMC: Likely to support USD unless rate hike delayed into 2016 – MUFG

By FXStreet FXStreet (Delhi) – Lee Hardman, Currency Analyst at MUFG, suggests that the US dollar continues to remain on the defensive heading into the FOMC meeting. Even the recent adjustment higher in US short-term yields ahead of the FOMC meeting has failed to offer support for the US dollar.

Key Quotes

“The disappointing performance of the US dollar may in part reflect nervousness that the Fed could deliver a dovish surprise today. However with the US interest rate market already discounting a very gradual profile for Fed rate hikes in the coming years, there appears limited scope for a dovish surprise.”

“The implied yields for the December 2016 and December 2017 Fed funds futures contracts are already at just 0.87% and 1.43% respectively. The Fed is unlikely to signal that rates will rise even more gradually.”

“The main negative risk for the US dollar in the near-term which could weigh modestly would be if the Fed signalled that it is now unlikely to raise rates this year. Back in June, fifteen out of seventeen FOMC participants expected the first rate hike this year.”

“We are assuming that the Fed will signal it remains on course to raise rates this year offering support for the …read more

Source:: FX Street