Four rate hikes next year from Fed dot plot? – Rabobank

By FXStreet FXStreet (Guatemala) – Our less hawkish expectation for Fed policy is consistent with our view that parity on EUR/USD may continue to be elusive in the months ahead.

Key Quotes:

“In its September dot plot, the Fed indicated that it was on course for 4 rate hikes next year. We see risk that this view will be pared back. We would argue that there are downside risks to the pace of the US recovery in the shape of weakness in the global economy and in the strength of the USD.

In a recent speech Vice Fed Chair Fischer referred to the 15% appreciation in the real, broad US exchange rate since the middle of last year as impacting both the US external sector and the inflation outlook.

As its stands all measures of US price pressures remain moderate. This afternoon’s release of US CPI is expected at just 0.0% m/m and 0.2% m/m for the core measure while wage inflation in the November jobs report was a contained 2.3% y/y, still below the averages maintained before the financial crisis. On the back of USD strength the US economy has already undergone a palpable monetary tightening. …read more

Source:: FX Street