USD: Hawkish FOMC Not A Game Changer For USD - Credit Agricole

Credit Agricole CIB FX Strategy Research notes that the Fed cleared the bar for a hawkish surprise as the median dot projection continued to signal one more hike by the end of 2017 and three in 2018.

"These parameters were unchanged from the June meeting, whereas most market participants expected the 2018 projection to fall by at least on hike on account of lower inflation.

With the market positioned short USD recently there is probably scope to squeeze these positions further. But we doubt that this is a game changer for the USD since markets are unlikely to fully price the December hike for now and will not fully converge with the 2018 dot-plot not least because there is considerable uncertainty about Fed leadership next year.

We maintain the view that the USD would need to see either major fiscal stimulus or a broad acceleration in inflation to post a sustained rally," CACIB argues.

Source: Credit Agricole CIB Research