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According to analysts at Westpac, the market focus this week will be on Wednesday’s FOMC meeting, which is again likely to emphasis a need for patience.

Key Quotes

“Of key interest will be the quarterly Summary of Economic Projections, including revisions to key forecasts, as well as any discussion around balance sheet normalisation.”

“The consensus is that the Fed Funds “dots” will be lower, but the key question is how far will they fall? The existing median for two hikes this year should likely fall to one, consistent with Westpac’s view. Two of seventeen dots expect no hikes this year, but with the Fed in data dependent mode and key communications underscoring the need for patience, it would be no surprise if this number was to jump significantly from two.”

“In addition, we will be very interested in the long run projection. It is likely to fall to 2.5%, which will provide some scope for a further fall in 10yr yields, although considering our expectation that yields should peak at or around the Fed Funds peak, an extended rally under that scenario should be short-lived. The more bullish scenario for bonds would be if the Fed were to indicate a willingness to cut rates near term.”