The Fed’s policy update has not significantly altered our view that the Fed is close to the end of its hiking cycle. 

While the Fed may now deliver one final hike in July, we remain unconvinced over the need for a second hike and believe that weaker activity and inflation data will encourage the Fed to signal that sufficient tightening has been delivered either at Jackson Hole over the summer and/or at the September FOMC meeting.

We don’t expect the US Dollar rally to extend much further unless backed up in the coming months by upside surprises for US activity and inflation data.