Credit Agricole CIB Research previews today's June FOMC meeting.

"We and the market expect that the Fed should keep its policy rates unchanged in June and remain data-dependent in its policy outlook. We also note that the FOMC's dual objectives of stable inflation and low unemployment have become less misaligned of late, after the US labour market consolidated and thus allowed policymakers to drop their easing bias in April and focus on accelerating US inflation," CACIB notes.

"Turning to the FX market reaction, we start by noting that, at the time of writing, US rates markets are already pricing in c.25bp of hikes by March 2027. This is a more hawkish view than our own and suggests that many Fed-related positives are already in the price of the USD. We also note that the currency is the most overbought G10 currency at present, according to our latest FX positioning data. This could suggest that the Fed would have to deliver a hawkish surprise for the USD to rally once again. At the same time, a potential dovish surprise from Warsh and co, could trigger some profit taking on long USD positions," CACIB adds.