Look for dollar gains on less-dovish Fed – Morgan Stanley

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Morgan Stanley on next week’s FOMC decision

The Federal Reserve won’t be dovish enough to meet market expectations, Morgan Stanley warns.

“On the whole, the FOMC materials are likely to be insufficiently dovish to meet the market’s lofty expectations,” a report today said. “USD is likely to outperform on the day, particularly against risk-sensitive currencies like high-yielding EM FX and the dollar bloc.”

They expect a 25bps cut from the Fed but believe the dot won’t show any more cuts this year and that there might not be a clear signal into 2020.

Eventually, they believe dollar strength will reverse as the strong USD leads to negative implications for the economy and the Fed cuts more aggressively.

ForexLive

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