The FOMC meeting is on 15 and 16 June TD Securities will be trying to assess the ‘tone’ of the result.
A less dovish Fed tone next week would help to stabilize the USD in the very short run.
- Of course, it may not reverse all of Q2’s weakness, but positioning has turned short once again, real rates might be bottoming, and global growth shows signs of pausing. All signs to expect some USD stability as we enter the summer months
On taper prospects:
- The tone will probably be slightly less dovish than in April. We expect the chair to say that the committee has started discussing a progress-dependent tapering plan while also emphasizing that action will require much more progress.
- Median projections for core inflation in 2022/2023 will probably rise slightly, consistent with a sizable revision to 2021 being viewed as “largely reflecting transitory factors.”
- The median dot will probably show a rate hike by end-23.