The Fed is in focus and tension is mounting. Where will the world’s most-popular pair go to?
Here is their view, courtesy of eFXdata:
Nordea Research discusses the USD tactical outlook around tomorrow’s FOMC March policy meeting.
“Most focus this week will be given to the FOMC meeting on Wednesday, as the market will be looking for signs on how, when and if the quantitative tightening will end. We judge that the current consensus expects the Fed to end QT by Q4-2019. Any hints on an earlier exit from the QT programme will give our slightly positive EUR/USD view a boost,” Nordea projects.
“We have the following thoughts on the three major issues ahead of the FOMC meeting:
Patience: The Fed is unlikely to change its stance from “patience” at the March FOMC meeting, with patience meaning that rates will remain on hold until it becomes clear whether the economic outlook has worsened as much as the markets seem to believe or whether it will remain relatively bright when the fog clears as the majority of FOMC members still seem to believe. Dot migration: Based on recent speeches, we believe that at least half the dots will have migrated lower, reflecting FOMC members’ reduced inclination to hike rates, with the median down to one hike this year (from two in December) and another hike in 2020 (unchanged from December). QT details: Market sentiment has brightened and the FOMC may decide to keep the announcement of QT details for a rainy day, but details could also be announced as early as next week. Our baseline remains QT tapering starting in Q3 and ending in Q4 with excess reserves around 1.000bn. It will be negative if the Fed announces that excess reserves will continue to fall after the end of QT,” Nordea adds.
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