FXStreet (Barcelona) – Senior Analysts at Danske Bank, expect the FOMC meeting to be dollar supportive, and note that Yellen will re-ignite the USD potential.
Key Quotes
“If we are right that the FOMC will give a two-sided message this week and thus spur limited upside pressure on US rates, we would not expect the meeting this week in itself to support USD crosses to any great extent.”
“That said, it should nevertheless pave the way for a continued improvement on the data front to kick start the re-pricing of the US yield curve that we deem the greenback will be very sensitive to in the months ahead.”
“With a September rate hike most likely to be kept as a viable option for the FOMC notwithstanding any downward revisions to the dots, our case for relative rates to support USD crosses in the months ahead remains intact.”
“While the volatility in European bond markets is a lingering risk of EUR upside, we retain the view that notably the 2Y EU-US yield spread possesses decent negative potential from here. Coupled with positioning lighter on USD longs – not least against the single currency – there should now be room for another leg lower in EUR/USD.”
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