The resilience of the US economy and the assumption that the Fed will deliver a hawkish hold at the FOMC today should ensure the USD remains well supported. 

The FOMC’s dot plot is likely to show one more rate hike this year as policymakers hold the door open for additional tightening. On the assumption that US rates are near their peak, the Fed, like the BoE and most other G10 central banks is likely to favour the ‘higher for longer’ mantra on interest rate policy. This will be designed to engineer a firm profile in market rates which will be necessary in the battle against sticky inflation pressures.

The USD is also set to find support from a decline in risk appetite linked with slowing growth in China and in Europe. In our view, Greenback is likely to remain well supported until Fed rate cuts come into view. This suggests a firm profile for the USD into next year.