Dollar firm as FOMC meeting begins - BBH

“DXY is up for the first time after three straight down days and trading back above 107. We are not yet ready to change our strong dollar call. However, we expect a period of consolidation ahead for the dollar until the U.S. economic outlook becomes clearer,” explains Win Thin, Global Head of Currency Strategy at BBH.

Additional Quotes:

“The two-day FOMC starts today and the Fed is widely expected to hike rates 75 bp to 2.50%.  WIRP suggests only around 15% odds of a 100 bp move.  With recent weakness in the data, there is simply no need to go bigger this week.  Updated macro forecasts and Dot Plots won’t come until the September meeting. 
Another 75 bp hike September 21 is about 50% priced in.”

“A 25 bp hike is fully priced in for November 2 but after that, one last 25 bp hike is only partially priced in.  The swaps market paints a similar picture, with 175 of tightening priced in over the next 6 months that would see the policy rate peak near 3.5%.  After that, an easing cycle is priced in for the subsequent 6 months.”