What's the post-Fed view?
Bank of America Merrill Lynch Global Research discusses the USD outlook in light of yesterday's FOMC policy decision.
"The US dollar rallied initially post-Fed decision but subsequently finished broadly weaker by the close of NY trading, driven largely by increased risk appetite. USD weakness was generally concentrated against traditionally higher beta FX such as the Australian dollar...We continue to see the US dollar firming into year-end and think that the sharp pullback since early October presents a buying opportunity. With the Fed now apparently comfortable with the current stance of policy, we think that the potentially-negative impact on USD via the rate differential channel has been lessened," BofAML notes.
"We still see EURUSD somewhat weaker by the end of the year, to 1.08, before appreciating again next year to 1.15, in a gradual move towards our equilibrium estimate of 1.20-1.25," BofAML adds.
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