Key takeaways

  • The Fed was more hawkish than anticipated and the Fed meeting most likely marked the first step of the Fed taking the foot off the gas.
  • Fed is now signalling two rate hikes by end-2023 and that the FOMC members will continue discussing tapering at upcoming meetings.
  • We have changed our Fed call now expecting the Fed to start actual tapering in Q4 21 and hike for the first time in H2 2022 (from January 2022 and Q1 23, respectively).
  • FX: We think the message from FOMC and the likely path for US monetary policy support our call for a lower EUR/USD. We still forecast 1.15 in 12M.
  • Fixed Income: Fed message adds more upside to UST yields. We believe that the risk is still tilted to the upside over the coming quarter and continue to see 10Y UST at 2.0% year-end. However, we should probably see an actual improvement in the labour market and a more firm discussion on tapering before we see a move to the 1.75-2.00% range

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