The Fed will most certainly deliver a 25 bps rate hike, which we think is the last. Even so, they will probably aim to maintain a hawkish bias, trying to validate the dots. It is the classic ‘have your cake and eat it too’ playbook. We think it will fail, leading to a weaker USD. It’s probably not the time to add bull steepners, but we also think the bear flattener regime is living on borrowed time.

For the USD, there has been a very clear ‘buy the rumor, sell the Fed,’ theme around the meeting dates since they first hiked last year. The USD has rallied in the run-up to the meeting, then declines on the day and subsequently declines. The data trends should outweigh the Fed rhetoric and reinforce this pattern of USD selling.