ANZ shares their outlook for the Federal Open Market Committee (FOMC) meeting scheduled for next week, anticipating a stance that may bolster the USD.
Shift in FOMC's Impact on the USD:
- Recent FOMC meetings in late 2023 led to a weakening of the USD, influenced by discussions around potential rate cuts and a focus on data-driven decisions.
Expected Pushback on Rate Cut Expectations:
- ANZ foresees Chair Powell counteracting current market expectations for rate cuts during the upcoming January meeting. This stance is likely to result in a strengthening of the USD.
Slight Bullish Bias for USD:
- Despite expectations of a hawkish hold, ANZ maintains a cautiously optimistic view of the USD's performance, anticipating a potential increase in its value.
Market's Reaction to Hawkish Rhetoric:
- There remains a risk that the markets might overlook the hawkish signals from the Fed and continue to expect rate cuts.
ANZ predicts a hawkish hold from the Fed in the upcoming January FOMC meeting, which could lead to a stronger USD. However, the market's response remains uncertain, as there's a possibility that traders might still cling to their rate cut expectations despite the Fed's pushback. The outcome of the meeting is crucial in determining the short-term trajectory of the USD in the global currency markets.