The Research Team at Bank of America Merrill Lynch (BAML) is out with its expectations of the FOMC monetary policy decision and its likely impact on the US dollar.
Key Quotes:
“As widely expected, we expect the FOMC to stay on hold at the conclusion of the 30 April-1 May meeting. The Fed should deliver a balanced message on the economy through the policy statement and the press conference.”
“A hawkish rates response to this Wednesday’s FOMC decision is likely to provide support to the USD…FOMC decisions have tended to support USD in the days following Fed statement release. Over the last year, the US Dollar Index (DXY) was up 8 times and down zero for an average return of about 1% five days post-Fed. Notably, current price action as measured over the last 20 days is about 90% correlated to April 2018 decision, after which the DXY appreciated by about 3% over the next month.
Moreover, USD carry remains strong, seasonal bullish and volatility abnormally low. This combination can support further USD gains over the near term.”
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