The key event next week will be the FOMC meeting. According to analysts from TD Securities, the central bank will announce a faster QE tapering. They don’t see rate hikes until 2023.
“The taper pace will likely be doubled to $30bn per month, consistent with QE ending in March. Officials will likely also convey a more hawkish tone through the statement, the economic projections, and the dot plot. The median dot will probably show a 50bp increase in 2022. We expect enough slowing in inflation and growth to delay rate hikes until 2023, but, for now, strong data are encouraging hawkishness.”
“Scope for USD upside is capped given how much is priced in the front-end. As a practical matter however, a hawkish SEP, a faster taper and less threat from Omicron leave the USD in our good graces still.”