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USD to remain supportive from FOMC but gains likely more modest

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This week’s Fed strategy from MUFG

This week's Fed strategy from MUFG

MUFG Research discusses its expectations for this week’s FOMC policy meeting on Wednesday.

“All in all, the FOMC meeting should prove supportive of the belief of moving toward the point of tapering.
Some of the Fed tightening that had been built into market pricing at
the short-end of the yield curve since the June FOMC has started to
reverse of late but we do not see the meeting further extending that
reversal. Longer-term yields have already reversed having reached
extreme lows unjustified by broader fundamentals and equity markets.
Yields could extend further higher. Assuming progress toward the point of QE tapering remains post-FOMC, the US dollar should remain supported,” MUFG notes. 

With positioning becoming more balanced, we suspect based on
our assumption for the FOMC meeting that gains for the dollar at this
stage will be more modest and contained
,” MUFG adds.

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