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Jan 25 - 12:55 PM

ANZ: Expectations of a Hawkish Hold from the Upcoming January FOMC Meeting

By eFXdata  —  Jan 25 - 10:45 AM

Synopsis:

ANZ shares their outlook for the Federal Open Market Committee (FOMC) meeting scheduled for next week, anticipating a stance that may bolster the USD.

Key Insights:

  1. 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.
  2. 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.
  3. 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.
  4. 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.

Conclusion:

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.

Source:
ANZ Research/Market Commentary

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