FOMC Preview: A lack of clear signal by the Fed likely? - RBS

FXStreet (Mumbai) - Analysts at RBS argue over the outcome of the July FOMC meeting which concludes later in the New York session to be followed by release of the key post-decision FOMC statement.

Key Quotes:

“Do not expect the Fed to move the policy rate at this week’s meeting and we see little necessity to change the statement this week.”

“Aside from small tweaks to update the current situation, we think the Fed’s broader stance on the economy and the timing / pace of tightening has not changed enough to merit a large change in this meeting, particularly one without new forecasts or a FOMC.”

“Our expectation that much of the key language is left unchanged should do little to shift market pricing of the Fed rate expectations.”

“Even so, with the market pricing in a near certain chance of no change tomorrow and just a 31% chance of a hike in September and less than one full hike this year, a lack of a clear signal that the Fed’s consensus view is shifting in the dovish direction may be a modest support for the USD.”

“The key hawkish risk would be the FOMC using the statement to set the stage for a rate hike coming as soon as the next meeting in September.”