In our FED preview, we laid out three scenarios, only one USD positive. Goldman Sachs takes a different view:
Here is their view, courtesy of eFXnews:
Tomorrow, in line with market pricing, we expect the FOMC to raise the federal funds rate by 25bp.
From there, our US economists price a more sizeable tightening cycle than the market (see Exhibit 1), and we expect further USD strength as the market re-prices more tightening from the Fed.
That said, we also think that Chair Yellen will continue to emphasise that monetary policy is not on a pre-set course and that the data will dictate the future path of interest rates.
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We expect the USD to continue to move higher and we forecast the TWI USD to appreciate about 7% versus G10 currencies over the next 12 months.
