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Apr 28 - 06:55 PM

USD: Fed To Hike 50bps Next Week; Not Expecting A Substantial USD Strength On The Announcement - Danske

By eFXdata  —  Apr 28 - 03:00 PM

Danske Research discusses its expectations for next week's FOMC policy meeting.

"We expect the Federal Reserve to hike the target range by 50bp, a view shared by consensus and market pricing. We expect the Fed to signal that more 50bp rate hikes are likely in coming months in order to get quicker back to neutral.  We expect the Fed to announce the balance sheet runoff to start in mid-May.

We expect the cap to be set at USD95bn as outlined in the minutes. Our current Fed call is that the Fed will hike by 50bp in May, June and July and 25bp in September, November and December (a total of 225bp). We still see risks skewed towards faster rate hikes, as monetary policy remains too accommodative," Danske notes. 

"At the Fed meeting itself, it seems likely that Powell will delivers what is already priced and expected by the market (and us). As such, we do not expect a substantial USD strengthening on the announcement of a 50bp hike - but rather view the USD strength as continuous; as it has been over the last one and a half year," Danske adds. 

Danske Research/Market Commentary


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