The FOMC meeting did not deliver a significant change in message, notes BNP Paribas.
“The message from the Fed is clearly one of data dependency and with recent data having been strong and the Fed’s own projections continuing to suggest rate hikes are coming within the 18 months, front-end rates need to reflect more risk premium,” BNP clarifies.
“The USD has lagged the move higher in US rates so far and our BNP Paribas positioning analysis suggests there has so far been little build up in long USD positioning. Our US rates strategy team does not expect front-end rates to retrace significantly from here, and, with data on an improving tangent and the period of Fed policy uncertainty drawing ever nearer, we think risks remain to the upside,” BNP argues
“This backdrop should be supportive for the USD over time, and we remain long USDCHF and short EURUSD in our portfolio,” BNP advises.