Apart from our preview detailing 4 Fed scenarios, here is the view from BNP Paribas, which has a clear direction:
Here is their view, courtesy of eFXnews:
The failure of the USD to gain ground more broadly despite the firmer risk environment is consistent with price action in US front-end rates, which continue to reflect that market participants remain unconvinced the data and risk environment will be sufficiently robust to allow Fed tightening to continue this year, notes BNP Paribas.
“We expect today’s FOMC statement to acknowledge recent market stress and mixed data but to emphasize the favourable medium term outlook and healthy labour market in an effort to maintain leeway to hike again in March. A result in line with our expectations should be USD supportive.
However, with Fed communication limited to only a statement this meeting, the risk environment still fragile, and the jury still out as to whether January market volatility will undermine economic activity, we suspect markets will be reluctant to rebuild Fed pricing too quickly,†BNPP projects.
BNPP recommends stating long USD into the event against EUR, CHF, JPY and AUD.
For lots more FX trades from major banks, sign up to eFXplus
By signing up to eFXplus via the link above, you are directly supporting Forex Crunch.
