USD: Fed To The Rescue: Will The USD Rally Out Of FOMC? – NAB

The Fed is making its decision today and a dovish hike is on the cards. How will the dollar react?

Here is their view, courtesy of eFXnews:

NAB FX Strategy Research expects a quarter-point lift to the Fed Funds rate (to 1.0-1.25%) at the FOMC June meeting and argues that any thing other than retention of the end-2017 median dot at 1.375% would be a major surprise.

“If no upsets here, then what if anything happens to the 2018 dots – and the narrative surrounding them in Yellen’s post-FOMC press conference, should be important,” NAB argues.

If the Fed highlights that the medium-term outlook for inflation or rates hasn’t really changed despite recent softer data, there is potential for the USD to rally out of the FOMC,” NAB adds.

However, NAB argues that a substantial USD rally will likely require strong US data over the coming months.

“We continue to expect this, hence our still bullish USD H2 2017 forecasts, for all bar EUR/USD,” NAB argues.