Federal Reserve: Hawkish hold could restore Dollar support – BBH

Brown Brothers Harriman’s Elias Haddad expects the Federal Open Market Committee to keep the federal funds target range unchanged at 3.50%-3.75% for a fifth consecutive meeting. While fed funds futures assign around a 30% chance to a 25-basis-point rate increase, BBH sees scope for an initial US Dollar pullback if the Fed holds, followed by a quick rebound if the decision is accompanied by a hawkish policy message.

Hawkish hold to anchor USD support

"USD is holding on to most of yesterday’s dip ahead of the FOMC policy decision (7:00pm London, 2:00pm New York) and Fed Chair Kevin Warsh’s press conference 30mins later."

"We expect the FOMC to keep the target range for the funds rate at 3.50%-3.75% for a fifth straight meeting."

"Fed funds futures price in over 30% odds of a 25bps rate increase today."

"USD risks a modest immediate kneejerk pullback if the Fed holds steady as markets unwind rate hike bets."

"Still, we anticipate USD to rebound quickly as a hawkish hold restores its policy support."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)