FXStreet (Guatemala) – Analysts at TD Securities explained that while they do not expect much from the Fed this week, they could set up the September meeting for the start of their hiking cycle.
Key Quotes:
“We expect a straightforward, but asymmetric FX market reaction to this week’s policy decision. It is unlikely at this meeting, but a clear confirmation that liftoff will begin in September would set the USD uptrend firmly into motion.”
“A more ambiguous statement that emphasises policy flexibility is unlikely to be seen as a great disappointment, however. The USD is likely to remain confined to recent ranges if the Fed does not give us clear direction. FX investors are simply likely to roll expectations forward one meeting to October.”
“Indeed, we see the risk of a dovish surprise that would be a longer-term hit to the USD as quite limited.”
“When it does arrive, we think the USD’s gains from tighter Fed policy are likely to be front loaded. Indeed, if policymakers hint strongly that a hike is imminent, the ‘easiest’ part of the USD move may come between that time and when the first hike is actually delivered.”
“On a longer-term perspective, we think the USD’s rally is looking increasingly mature and we are starting to look ahead to the end of the market’s singular focus on USD strength.”
(Market News Provided by FXstreet)