Central Banks


TD on the FOMC

TD Securities is out with an FOMC preview. They — along with just about everyone else — expect a 25 bps hike.

They expect the language to be shifted from:

“The stance of monetary policy remains accommodative”

to:

The stance of monetary policy remains somewhat accommodative”

As for the trade, their baseline is for US dollar buying on the headlines but say that may present opportunities:

“We believe that the market is leaning towards a hawkish reaction, owing to recent Fed speeches and elevated positioning in the USD. While we think the Fed maintains the accommodative language and delivers a rate hike, this is mostly priced in now. That leaves a possible asymmetric response in the FX markets where the USD weakens more on a dovish take than rallies on a hawkish one. If the market takes the USD higher on that baseline, we think it offers attractive risks rewards to fade against the EUR,” they write in a note.

               



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