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Dec 09 - 01:24 PM
EUR/USD: Could Drift Lower If FOMC Affirms Wait-And-See Stance On Wed - Danske
First appeared on eFXplus on Dec 09 - 11:40 AM

Danske Research discusses its expectations around this week's FOMC meeting. 

Following three cuts in a row, we expect the Fed to remain on hold (target range 1.50-1.75%) when it meets this week. We do not expect major changes to the statement.

Focus is likely to be on the updated ‘dots’ (i.e. policy rate projection). The Fed cutting once more than the median projected at the last dot update in September will automatically lower the ‘dots’ this year. The big uncertainty is what the Fed will signal for next year. We expect most members to signal that they expect the Fed funds target rate to remain unchanged in 2020 but we are looking to see whether one to two FOMC members signal an easing bias (however, this is not our base case)," Danske projects. 

"The Fed funds market is pricing the Fed keeping rates on hold in December and with a high probability in January too (based on the effective Fed funds at 1.55%). Hence, this week’s Fed meeting might not end up being a significant market mover on the day. That said, the market is still pricing some probability of another 25bp rate cut in H1 next year. If the Fed affirms its wait-and-see stance, we could see USD rates go a bit higher, which should send EUR/USD lower. We forecast EUR/USD will go to 1.09 in 1-month," Danske adds. 

Source:
Danske Research/Market Commentary

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