USD Views

From the FXWW Chatroom: In our view President Dudley’s comments incrementally raise the probability of a rate increase as soon as the June FOMC meeting. At this point we have not made any changes to our forecast that the next rate increase will come in September. However, our main takeaway from recent Fed communication is that an increase at some point over the next three meetings looks highly likely, even if it is a close call as to whether the FOMC acts in June, July or September. [GS]
In our view, a rate increase at the June meeting would require: (1) continued healthy economic data, and particularly a solid May employment report; (2) lower concern among committee members about possible fallout from the UK’s vote on its membership in the EU; and (3) relatively high market-implied odds on the eve of the meeting. If needed, the latter objective could be helped along by Chair Yellen’s speech scheduled for June 6—the last day before the blackout period for the June meeting. [GS]
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