Credit Agricole CIB Research discusses its expectations for today's FOMC policy decision.
"Our own view is that the Fed will hike by 75bp and signal a terminal rate of 4.25%. We therefore believe that the FOMC could struggle to meet or exceed the already hawkish market expectations. With many Fed-related positives in the price, we believe that the key USD driver would be the impact of the policy meeting on risk sentiment. In that, we remain quite cautious given that Fed Chair Jerome Powell could use the press conference to highlight that the Fed remains very focused on US inflation rather than growth," CACIB notes.
"In turn, we think that the safe-haven USD could remain supported with the less liquid, risk-correlated currencies likely to bear the brunt of any further USD gains. At the same time, provided that the impact of the Fed on the US fixed income markets remains muted overall, we think that any USD gains would be less pronounced vs the JPY, CHF and EUR," CACIB adds.