Hawkish Fed cut could boost USD but hang on for loses later - Citi

Citi on today's Fed decision

Citi discusses the USD outlook around today's FOMC policy decision.

"Trade talks, not Fed outlook to drive dollar direction - the prospect of a "hawkish" Fed rate cut (ie. a 25bp cut but signaling maybe one more cut at best) may lead to some USD gains over the next 24 hours as US rates markets adjust to a less dovish outlook (from currently pricing 3 Fed cuts including the one likely tonight)," Citi notes.

"More fundamentally though, the bias remains for a weaker USD though the path to sustained weakness lies with a resolution of the US - China trade dispute, not with Fed rate cuts. Should a trade deal be concluded in October, it could see a significant reversal in current CNY/ CNH weakness likely to flow on to strength in other risk currencies within G10 and EM (commodity bloc, Asia EM and even EUR)," Citi adds.

For bank trade ideas, check out eFX Plus.