20 major firms off their FOMC trading strategy
BNPP: Long USD Vs GBP, EUR & JPY Into FOMC.
Heading into the FOMC we hold three long USD recommendations: vs GBP through cash and EUR and JPY via options*. Our economists expect the statement to present a more upbeat economic assessment. They highlight that data have been generally positive since the committee met in June and some downside risks to the outlook have diminished. June payrolls likely brought relief to the Fed. There has been better news outside the labour market too, particularly with the loosening of US financial conditions post-Brexit. That said, we do not expect any strong hawkish signals from the statement. But against a backdrop of only 5bp of tightening priced for the September meeting, it will not much for markets to get nervous that September is underpriced and for the USD to benefit. If the risk environment weakens as Fed pricing shifts, we see lots of scope for downside in GBP, JPY and commodity FX vs the USD.
