Federal Open Market Committee reaffirms its "Statement on Longer-Run Goals and Monetary Policy Strategy"

What the desk is arguing

The desk frames this as a clear indication that the FOMC is prioritizing stability over aggressive rate hikes, which could bolster the USD in the near term. This decision comes as inflation rates have shown signs of moderation, yet remain above the Fed's 2% target, necessitating a cautious approach to monetary policy.

Supporting this view, the FOMC's reaffirmation of its longer-run goals suggests that the central bank is not in a rush to alter its current policy framework. Recent data indicates that while inflation has eased slightly, it still hovers around 3.5%, underscoring the Fed's balancing act between fostering economic growth and controlling inflation.

Where it sits in our coverage

Our consensus target for USD positioning is 1.075, with a range from 1.04 to 1.12. Notable firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)

This view aligns with jpmorgan, which is slightly above the consensus target, while bofa presents a more cautious outlook at the lower end of the range. The desk's call is positioned near the upper bound, suggesting a bullish sentiment on the USD.

How other firms see it

Firms such as citi and goldman share a similar outlook, expecting the USD to strengthen as the Fed maintains its policy stance. Conversely, deutsche and bofa are more skeptical, anticipating potential downside risks to the USD if inflation continues to decline more rapidly than expected.

Watch the EUR/USD trajectory for potential spillover effects from the Fed's decisions, as well as the upcoming housing starts data, which could influence market sentiment surrounding the USD.

What the calendar says

With the FOMC Minutes scheduled for May 20, traders should prepare for potential market volatility as insights into the Fed's deliberations may provide further clarity on future monetary policy direction.