According to the economists at Bank of America (BofA), the US Federal Reserve’s (Fed) hawkish signal at the January FOMC meeting will fuel another leg up in the UIS dollar.
Key quotes
"The Fed will announce the last round of asset purchases at the Jan FOMC meeting, and we see risk for a further hawkish pivot…Chair Powell is likely to signal the first hike at the March meeting and note that every meeting is live."
"In our view, a hawkish FOMC this week should serve as a key catalyst for another leg of US dollar appreciation against lower beta FX.”
“Our forecasts for EUR/USD and USD/JPY this year remain 1.10 and 118, respectively, and we see the risks of attaining that sooner."
“We expect the first-rate hike to be in March, with 25 by hikes in each of the next eight quarters.”
“We now expect QT to be announced at the June FOMC meeting, with risks skewed earlier to the May FOMC meeting.”