HSBC strategists note USD dip after FOMC meeting but expect longer-term strength due to US economic resilience and rate differentials.
The Federal Reserve left its policy rate unchanged at 3.50-3.75% during its July meeting, aligning with economist expectations but disappointing markets that had priced a 35% chance of a 25-basis-point hike. The decision triggered immediate USD weakness as rate expectations were adjusted lower.
Chair Warsh’s comments were interpreted as dovish, with limited guidance on near-term hikes and no clear disclosure of the committee’s internal debate. Despite this, the Fed reiterated its commitment to returning inflation to the 2% target, citing recent economic shocks and supply-chain strains as key discussion points.
HSBC strategists maintain a constructive USD outlook, citing resilient US economic activity and widening interest rate differentials as drivers for potential longer-term strength.