No Fed Hikes Through 2017, No Rush To Buy USD, EUR/USD Towards 1.16 - BNPP

The typically dovish Chicago Fed President Evans said that he still expected two rate hikes this year, in contrast to markets that are pricing a total of 18bp of tightening by year-end but the USD is struggling to benefit, however, as US 2y yields continue to move lower still, notes BNP Paribas.

"Our economists continue to see no Fed hikes through 2017, consistent with their growth forecast that is both below the Fed’s view and below market consensus.

Against this backdrop, we don’t see the market re-establishing a long USD trade any time soon, although with net USD positioning already slightly short in the G10 according to BNP Paribas positioning analysis we would expect only moderate USD weakness, with EURUSD climbing to 1.16 by Q2," BNPP argues. 

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