Morgan Stanley on how the FOMC will boost the US dollar (spoiler – hawkish rise!)

Morgan Stanley Research discusses the outlook for the dollar around the July FOMC policy meeting.

  • “Our economic research colleagues expect the FOMC to hike rates by 7513p – in line with the 78bp implied by swap pricing. However, with the equivalent of less than six 25bp hikes priced in over the course of Looking ahead to the year, we think the risk is that the market will head for Fed price tightening over the next few quarters,” MS notes.

  • The Federal Reserve could frame its July hike in relatively hawkish terms, softening the prices of risky assets and boosting the USD widely. Conversely, we believe the global outlook supports maintaining long USD positions. The sell-side forecast for US growth in 2022 has dropped significantly – to levels close to our own expectations. However, growth expectations in the rest of the world could drop further,” MS added.

This snippet is via eFX. Bold mine.

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