ING strategists Francesco Pesole and Frantisek Taborsky expect the Federal Reserve to keep rates unchanged, with two dissenters possibly voting for a hike, limiting downside in front-end USD rates.
They argue the Dollar could weaken as precautionary positioning is unwound and DXY reconnects with lower Oil prices
ING sees downside risks for the Dollar and a potential test of 101.0 in DXY this week. Dollar seen pressured after Fed “Our Fed preview, published last week, argued that precautionary positioning for a potential surprise Fed hike could keep the dollar supported going into today’s FOMC announcement. That appears to have been the case.
Despite softer consumer confidence data and de-escalation headlines weighing on the dollar yesterday, DXY has shown little sensitivity to the recent decline in oil prices.” “But that resilience will be tested heavily today. Markets are pricing in 7bp, or about a 25-30% probability of a Fed hike today. That, in theory, implies a mechanical correction lower in front-end USD rates if – like we expect – rates are kept unchanged.” “It seems to us that consensus expects two dissenters – Logan and Hammack – to vote for a hike.