USD gains extend as investors look ahead to the FOMC meeting outcome. Economists at Scotiabank analyze Greenback’s outlook.
Markets will be sensitive to the refreshed dot plot and economic projections
The upcoming Federal Reserve meeting is not anticipated to result in any changes to monetary policy, with the target rate expected to remain at 5.50%, similar to January’s stance. While the policy statement may see minimal adjustments, the market will closely monitor the updated dot plot and economic projections, particularly during Chairman Powell’s press conference, for insights into the future rate outlook.
Despite persistent inflation concerns, policymakers might lack sufficient data to significantly revise their outlook. It’s possible that the dot plot may see marginal alterations but could still indicate a median decrease of 75 basis points in the target rate for this year.
Any slight upward revisions to inflation forecasts may be counteracted by weaker growth and employment projections.
Market sentiment remains cautious amid concerns that the Fed may adopt a hawkish tone. As a result, investor positioning and sentiment could be susceptible to a neutral-to-dovish outcome compared to market expectations.
