Research Team at Deutsche Bank, suggests that as we hear the latest from the Fed after their FOMC, the probability of a June hike has gone up to 54% (from 2% at the lows last month) and the Fed are probably going to be in a more confident mood than they were at the end of January.
Key Quotes
“DB’s Peter Hooper expects the Fed to be very much in wait and see mode but also see risks as close to balanced and a rate hike by June as likely if economic and financial conditions develop along the lines they are expecting. Economic data on the whole has been improved since January (yesterday’s retail sales data aside – which we go into below) which should allow the FOMC to sound a bit more upbeat.
Wage inflation indicators are pointing to a small net acceleration on balance, while the price inflation picture, although still mixed, is also moving in the right direction. US financial conditions, after deteriorating sharply earlier this year, have returned most of the way to their end-2015 levels in recent weeks. Peter thinks that on balance, the BoJ and ECB actions will not restrain the Fed. Clearly a lot of the
Focus will also be on the dot plots which will likely be revised down with the median number of rate hikes this year reduced from four to three. It’s also possible we see the longer-term neutral dot move down from 3.5% to 3.25%. All this at 6.00pm GMT tonight.”
(Market News Provided by FXstreet)