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Fed expected to keep rates unchanged – TDS

The Federal Reserve's (Fed) Federal Open Market Committee (FOMC) is widely expected to keep rates unchanged on Wednesday, with Chairman Jerome Powell likely providing a similar policy message compared to May, analysts at TD Securities write in a note.

US Dollar set to remain strong

"The base scenario is that the chairman appears somewhat optimistic given the recent evolution of the data, especially if the May CPI report shows further progress on inflation. We also look for the dot plot to show two cuts as the 2024 median."

"Treasuries will react to the dot plot and possible dovish lean from Powell with a modest bull steepening. However, continued range trading is likely given ongoing "data dependent" outlook."

"Expect the US Dollar (USD) to remain strong amid relative rate divergence and a narrowing window for FX vol to remain suppressed."

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