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BBH expects Fed to hold rates, with USD pullback then rebound

BBH sees about a 30% probability priced in for a 25-basis-point hike, and links any initial USD weakness to a hold-only outcome paired with a hawkish message later.

Reported · Written up by our desk · Major Pairs

Brown Brothers Harriman’s Elias Haddad expects the Federal Open Market Committee to keep the federal funds target range unchanged at 3.50% to 3.75% for a fifth straight meeting, according to an FXStreet Insights note.

BBH said fed funds futures are assigning roughly a 30% chance to a 25-basis-point rate increase, but it expects scope for an initial US dollar pullback if the Fed holds, followed by a quick rebound if the decision comes with hawkish communication.

In the FX market, FXStreet noted GBP/USD hovering near 1.3300 as the dollar struggles ahead of the FOMC, while EUR/USD stays in a tight range below 1.1400 with investors positioned for the Fed decision amid risk-averse sentiment tied to the Middle East.

FXStreet also pointed to potential headwinds for the dollar and related moves from renewed escalation in the Middle East and surging oil prices, while gold and digital assets remained sensitive to the pre-Fed setup.

Latest closeGold $4,023.80 ▼1.2%|EUR/USD 1.139 ▼0.1%|GBP/USD 1.329 ▼0.5%

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