Dollar longs awfully attractive
Three ways the Fed could be hawkish:
- Optimism on the economy in the statement
- A warning about inflation or rate hikes in the statement
- Three or more hikes remaining on the dot plot
If any of those comes to fruition, the best trade out there is buying the dollar. The best spots are versus EUR (EUR/USD shorts) or GBP (cable shorts).
The immediate risk is that Yellen says something different in her press conference. It begins 30 minutes after the releases.
If I were to highlight one focus in this decision it would be whether the Fed hikes in June or not. The market is currently showing a 53% chance they hike then (or sooner) and 47% they don't.
