Citi

The USD is holding onto its post-FOMC gains. The projections had the median dot implying two 25bp hikes by the end of 2023 and at the press conference, Powell acknowledged the risk of higher inflation and characterized the meeting as “talking about talking about” tapering. CitiFX Strategy thinks that it makes sense not to stand in the way of the USD’s rally.

In a context of a strong USD against most majors, NZD and AUD were holding their ground. Today’s data showed that New Zealand’s economy grew much faster than expected in the first quarter. In a similar show of strength, Australia reported unemployment rate tumbled to pre-COVID levels. On the other hand, KRW declined as much as 1.5% before paring losses to -1.1% after BoK pledged to stabilize markets if necessary while ZAR/MXN lead losses elsewhere.

Looking ahead, Norges, SNB, BI, CBT and Taiwan CBC rates decisions are due later today.

RBC Capital Markets

Day ahead: There are rate decisions from SNB, Norges Bank, BI, CBRT, and BoJ (see below).Data wise, there are CPI prints in Japan and the Euro area (final). In the US, releases include the Philly Fed business outlook index and weekly jobless claims, while CA publishes data on international securities transactions. There also several ECB speakers(Villeroy, Lane, Elderson, Visco) which may serve to reinforce the gap in rhetoric between them and the FOMC.

The post-FOMC reaction was the largest we have seen in a long time.While markets had started leaning towards a hawkish tilt in recent days, the SEP delivered and unusually (for a chair that always has a dovish word to say), Powell reinforced the message. In FX, USD rallied across the board, with DXY up nearly 1%. The move is larger than the recent beta to rate moves would suggest and the initial interest we saw was to fade it in USD/CAD for example. Recent FOMC meetings would support that (the reaction on the day tends to be reversed in the rest of the week – see last night’s Chart of the Day). But we think USD will hold onto its gains