Fed: 25bp rate hike is fully priced - BNPP

Focus now shifts to the FOMC meeting on Wednesday (14 December) and a 25bp rate hike is fully priced by markets, and markets are also close to fully pricing two hikes next year explains Research Team at BNP Paribas.

Key Quotes

“With the Fed likely to be cautious about over-committing to further tightening in its communication, we see little scope for this week’s meeting to boost the USD further in the short term. However, anticipation of further tightening should guide US rates and the USD higher as we move through 2017.”

“We think USDJPY will continue to outperform, as monetary policy divergence between the US and Japan will be particularly strong if the Federal Reserve hikes rates and the Bank of Japan maintains its yield curve targeting policy as we expect. We target USDJPY to reach 128 by the end of 2017.”