Citi discusses the Fed policy trajectory and is tactically bullish on the USD over the coming weeks.
"The Fed was careful to stress its ‘risk management approach’ to be in a position to act in the case of higher-than-expected inflation instead of providing forward guidance, even as it also said to be patient before making such decisions. Where does that leave us? Still bullish USD," Citi notes.
"Citi Economics revised upwards its base case for the first 25bp rate hike from December 2022 to June 2022, with quarterly hikes expected thereafter (three hikes in 2022). Our economists expect strong inflation to lead Fed officials to accelerate the $15bln/month pace of tapering in January but note that their view depends heavily on expected stronger upcoming core inflation readings and a structurally tight labor market," Citi adds.