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Jun 07 - 12:55 PM

Credit Agricole: Expecting a Hawkish Hold at Next Week's FOMC Meeting

By eFXdata  —  Jun 07 - 11:40 AM

Synopsis:

Credit Agricole expects a hawkish hold from the Federal Open Market Committee (FOMC) at next week's June meeting. This stance could impact FX carry trades and boost the US dollar by dampening risk sentiment and encouraging investors to reassess their rate outlook.

Key Points:

  1. FOMC Outlook:

    • Credit Agricole predicts the FOMC will maintain current interest rates at the June meeting.
    • The Fed is likely to signal that persistent US inflation could result in fewer rate cuts this year and next, indicating a hawkish hold.
  2. Market Reactions:

    • A hawkish hold could lead rate investors to reassess their outlook on interest rates.
    • This reassessment could negatively affect risk sentiment, providing a boost to the US dollar, especially given its high-yielding, safe-haven status.
  3. Impact on FX Markets:

    • The immediate outlook for FX carry trades hinges on the outcome of the FOMC meeting.
    • Potential positive economic data surprises could have a more significant impact on FX markets compared to any disappointments, emphasizing the importance of forthcoming data releases.

Conclusion:

Credit Agricole anticipates a hawkish hold from the FOMC at next week's meeting, which could lead to a reassessment of rate outlooks by investors and bolster the US dollar. This stance, coupled with potential positive economic data surprises, could significantly influence FX carry trades and market sentiment. Investors should closely monitor the FOMC meeting and upcoming economic data for further guidance.

Source:
Crédit Agricole Research/Market Commentary

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