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Fed: USD can continue to trade higher on a more hawkish dot plot – OCBC
The big focus is on the Fed. Any moves in the dot, especially in 2024 will have a significant impact on markets, FX. Economists at OCBC Bank considered three potential scenarios with regard to 2024.
A more dovish dot plot would lead to dovish re-pricing, weighing on USD
A scenario of no-change to dot plot will come as a relief to risk assets. USD may ease as markets have already unwound their prior dovish bets to be aligned with the Fed’s Jun dot plot.
A case of more dovish dot plot (i.e. if the Fed looks for more cuts than what they have pencilled in) would lead to dovish re-pricing and that can weigh on USD.
A more hawkish dot plot (i.e. Fed looks for lesser cuts, dots shift higher) would lead to hawkish re-pricing. Yields can run higher, and USD can continue to trade higher. This would be a risk-off scenario for risk assets. In this scenario, alongside higher Oil prices, there will be upward pressure on inflation and yields. This may result in a deterioration of global growth/inflation mix and can cause headwinds to risk appetite and undermine Asian FX, especially those that are net oil importers, such as THB, PHP.
Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.
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