Danske Research discusses its expectations for this week's FOMC policy meeting.
"We doubt that the upcoming Fed meeting will be a significant one. In particular, we are looking for changes in the communication on QE. We think the Fed will repeat that bond buying will continue at the current pace “until substantial further progress has been made” but that Fed Chair Powell will acknowledge that tapering discussions have moved closer at the press conference. We expect the Fed to signal one rate hike in 2023 (from zero currently)," Danske notes.
"A more hawkish Fed may weigh on EUR/USD spot. As has been the case since last year, the global easing of liquidity conditions and ensuring reflationary trends have been a tailwind for spot... In our view, we are in the early discussion of a liquidity tightening by US, which adds on top of the Chinese tightening since Q4 of last year," Danske adds.