From BNP Paribas:
The USD remains vulnerable in the aftermath of the September 21 FOMC meeting, with US real yields having retreated sharply. We expect the Fed will ultimately deliver a rate hike in December, and Fed speakers this coming week are likely to emphasize that they remain prepared to hike rates further before year-end if data is supportive. Fed Vice Chair Fischer speaks on Tuesday and Chair Yellen has scheduled testimony on bank regulation on Wednesday and a speech to a banking conference on Thursday.
However, with the Fed outlook highly data and financial conditions dependent, markets are unlikely to increase pricing for a December hike much beyond the 50-55% chance currently reflected in rates markets. Firmer US data could have more influence on pricing, but we expect this week's US numbers to be less-than-helpful in this regard. We expect personal income and consumption to have slowed in August and look for a contraction in durable goods orders after July's jump.
We see scope for USDJPY to trade below 100 near-term and for EURUSD to recover above 1.13.
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