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The takeaway from the Fed will boil down to a few key signals, according to Mark McCormick, North American Head of FX Strategy at TD Securities.

Key Quotes

“First, the signal on the neutral is critical since it signals a possible endgame over the next few years. We think the median longer-term dots drop to 2.75%. Second is whether the Fed still feels the policy stance is accommodative. Any modification to that language would be a dovish surprise.”

“We are not downplaying that there will be some hawkish elements to the meeting. Indeed, the 2018 dots could show more support for a fourth hike but the market is already pricing in two more hikes next year after today’s meeting. The dots already imply an overshoot of the terminal rate above 3% and we simply think the bar is high for a hawkish surprise.”

“That means there is plenty of room to fade any knee-jerk reaction, but on balance, we think the USD ends the day lower.”