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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.”