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- USD: Risks skewed to downside depending on Fed’s forward guidance – BofA
USD: Risks skewed to downside depending on Fed’s forward guidance – BofA
FXStreet reports that analysts at Bank of America (BofA) believe that the Fed monetary policy decision is unlikely to have a significant impact on the FX market.
"We expect the Fed to take the first step in shifting from stabilization to accommodative policies at the upcoming meeting. This will likely take the form of stronger forward guidance, linking the ZLB to an inflation overshoot.
“We also expect the Fed to tweak the statement to tie the balance sheet policy to support the economy rather than market stabilization.“
"The US rates market will be most focused on changes to forward guidance and any balance sheet adjustments. We see risk the rates market is underwhelmed by the guidance provided by the Fed, which would support higher back-end rates and a steeper curve. “
“We anticipate a subdued reaction in the FX market, with risks somewhat skewed USD-negative on the day depending on forward guidance language."
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