In our view, the statement is consistent with an FOMC that remains on track to hike rates this year, conditional on a rebound in GDP growth in the current quarter and employment, which accelerates to an above 200,000 per month average again in coming months. Thus, we stick to our expectation that the Fed will deliver a first 25bp rate hike in September this year.
The first hike from the Fed is now fully priced in December this year but the path of hikes over the following two years remains extremely subdued. We continue to expect US economic data to show improvement over the coming months and the labour market to continue to tighten. Hence, we stick to our call of a first Fed funds rate hike in September this year, which will, in our view, pave the way for significantly higher rates in the 2-5Y segment of the curve in coming months as the first rate hike draws closer.
We continue to expect EUR/USD to fall over the coming three to six months on relative monetary policy expectations. A near-term stabilisation of EUR/USD will probably be subject to a general improvement in risk sentiment, while the next leg lower in the cross is likely to depend on positive US data surprises.
To Read the Entire Report Please Click on the pdf File Below