Citi discusses its expectations for tomorrow's FOMC policy meeting.
"With eyes on FOMC on Wednesday, we highlight our strategists’ pieces again. Wednesday’s FOMC is expected to lay out the Fed’s taper timeline. CitiFX Strategy think that Chair Powell will not push back too forcefully against expectations of an early interest rate hike in 2022, while also announcing its tapering process, which Citi Economics believes as well. Our strategists continue to expect USD strength vs the major alternative funding currencies," Citi notes.
"Nonetheless, given that the USD and US rates remain linked, some FX weakness could come on the back of unravelling Treasuries should the Fed fail to meet market expectations. Our strategists have shifted their tactical USD view from bearish to neutral," Citi adds.