FOREX: From Soc Gen: USD/JPY would likely rally on...
FOREX: From Soc Gen: USD/JPY would likely rally on a steady Fed The dollar would likely rally if the Fed were to reiterate the median expectation of another hike this year and three in 2018. Balance sheet reduction on the other hand is broadly expected. Given robust risk sentiment, a hawkish Fed surprise is likely to incite a sharp bounce in USD/JPY, which remains tied to the twists and turns of US interest rates.
BARC: We expect the FOMC to announce balance sheet reduction at today's policy meeting and to keep the door open to a December hike, which we view as more likely than not |2|. Considering the path of policy for 2018, the key question, in our view, is how much of the recent disinflation is viewed by the FOMC as persistent versus transitory and the extent to which this is reflected in the "dot plot".