Seeking Fed Fades
The past 48 hours of news-flow from the US have suddenly cast Fed expectations in a new light. As the Fed Chairmanship appointment saga develops in the backdrop of softer US data and a potentially bruising budget battle ahead, many investors will believe the balance of risks are towards a more conservative FOMC path. We believe such concerns are overdone, but from a tactical perspective it appears markets are pushing for a re-pricing. The process will likely begin in the rates space, but swift transmission into FX markets is likely. However, within G10 we find that in the event of a Fed ‘correction’, the trades are not as clear-cut.
Read the full report: UBS