TD on the FOMC
TD Securities is out with an FOMC preview. They -- along with just about everyone else -- expect a 25 bps hike.
They expect the language to be shifted from:
"The stance of monetary policy remains accommodative"
to:
The stance of monetary policy remains somewhat accommodative"
As for the trade, their baseline is for US dollar buying on the headlines but say that may present opportunities:
"We believe that the market is leaning towards a hawkish reaction, owing to recent Fed speeches and elevated positioning in the USD. While we think the Fed maintains the accommodative language and delivers a rate hike, this is mostly priced in now. That leaves a possible asymmetric response in the FX markets where the USD weakens more on a dovish take than rallies on a hawkish one. If the market takes the USD higher on that baseline, we think it offers attractive risks rewards to fade against the EUR," they write in a note.
