The FOMC will maintain the ‘higher for longer’ outlook for interest rate policy. Thus, economists at Rabobank expect the US Dollar to streghthen, driving EUR/USD and USD/CHF to 1.05 and 1.05 on a three-month view, respectively.
USD will remain underpinned this year
“Earlier this week, the hawkish tone of Chair Powell’s testimony led to an increase in market expectations that the Fed could hike interest rates by 50 bps at its March policy meeting. His tone was pared back a touch on the second leg of his hearing the following day when he indicated that the discussion about the size of the move was still in play.”
“For choice, we maintain the view that policymakers will be forced into holding rates higher for longer to push inflation back to the 2% level.”
“We maintain our expectation that the USD will remain underpinned this year. We see risk of dips to EUR/USD 1.05 on a three-month view and forecast USD/CHF at 0.95 in three months.”
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