The Fed said its word, and it was dovish. The US dollar slipped against quite a few currencies.
What’s next for EUR/USD? The team at Nomura analyzes:
Here is their view, courtesy of eFXnews:
The Fed delayed liftoff at the September meeting, and the details of the statement, SEP, and press conference had some dovish elements, notes Nomura.
“1. there were a few passages of caution in the statement, both on inflation and on foreign developments, and2. the dots suggest that a number of the FOMC participants that make up the core consensus group now anticipate a slower pace of tightening (less than 4 hikes),” Nomura clarifies.
For the FX market specifically, Nomura doesn’t think the information received today will lead to a sustained unwinding of USD longs versus G10 currencies””i.e., momentum could fade within a few sessions.
“We have been flat in terms of USD exposure versus majors for the last several weeks in anticipation of this outcome. But looking ahead, the Fed is still operating with liftoff this year as the central case, as the 2015 dots clearly signal,” Nomura argues.
“Bottom line: We still believe that our 1.10 year-end target for EURUSD is likely to be achievedunder the assumption th that the Fed is able to raise rates by the December meeting, which seems fairly likely,” Nomura projects.
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