FXStreet reports that economists at Rabobank anticipate that the USD is likely to be on the front foot ahead of the June 16 FOMC meeting.

“For the USD a reduction in inflation could be supportive insofar as it would boost the value of real yields in the US. On the other hand, the strength of US CPI inflation underpins the view that the first tapering announcement from the Fed is inevitably becoming closer. News on this front would also be positive for the USD. While there may be scope for some short-term disappointment for the USD on the event, we would expect this to be short-lived.”

“We see scope for EUR/USD to test 1.20 this summer on anticipation that the tapering discussion at the Fed will soon begin in earnest.”

“As long as further out inflation forecasts remain anchored the market should absorb this well. That said, a revised inflation outlook increasing the risk of an upward shift in the median expectations regarding the Fed fund rate.”