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Greenback A Touch Softer As US CPI/FOMC Approach

EMERGING MARKETS
  • Fed week begins with markets appearing happy to keep the dollar moderately weaker ahead of the FOMC meeting. The most notable event beforehand will be the US CPI data, significant in shaping the final expectations for Wednesday’s decision, where the core expectation is for an unchanged 'skip' meeting from the Fed.
  • While data and events since early May have on balance probably justified another 25bp hike, some data have left room for doubt, and the FOMC has set a fairly high bar to further tightening. In an effort to maintain a hiking bias, the Statement’s forward rate guidance is likely to remain unchanged, with the updated economic projections showing that an additional rate hike is expected by year-end.

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