Home USD: Fed ‘Accidentally Hawkish’ On Wed; Expected USD Price Action – BofAML
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USD: Fed ‘Accidentally Hawkish’ On Wed; Expected USD Price Action – BofAML

It’s Fed Day, or Jay Day if you wish. Markets await the words coming out of Fed Chair Jerome Powell’s mouth. Will he be hawkish or dovish?

Here is their view, courtesy of eFXdata:

Bank of America Merrill Lynch discusses its expectations for tomorrow’s FOMC meeting and the USD price action around the Fed policy decision.

The Federal Reserve is likely to deliver a message of patience at the  30  January meeting,  but we are skeptical it will be as dovish as the market expects.  ..In particular, we expect the Fed to remove the perceived calendar guidance of  “further gradual increases”  and replace it with more  data-dependent language,” BofAML projects.  

“USD price action on Wednesday will be determined by Fed guidance with respect to the following: (1)  policy bias;  (2)assessment of risks; and  (3)  the balance sheet…On net, we think the Fed may not be dovish enough given the markets mindset.

Accordingly, we see USD event risk skewed  to the upside against higher beta FX and to the downside against JPY and CHF,  ie,  a classic  risk-off  reaction in FX markets. The yen looks poised to outperform on the crosses,”BofAML adds.

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Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.