The Fed could keep its Dot projections unchanged, delaying most USD moves to April’s data releases – ING

Economists at ING analyze how the Federal Reserve meeting on Wednesday could impact the US Dollar (USD).

No fireworks from the Fed

The short-term reaction in the Dollar should be primarily driven by projections on rates and other macro indicators. We expect an unchanged Dot Plot but admit that a hawkish revision looks more likely than a dovish one.

We doubt the meeting will prompt tectonic shifts in FX positioning. Potential Dot Plots adjustments point to some upside risks for USD, but cautious optimism on disinflation points to a softer USD. 

Ultimately, the Fed may not provide enough reasons for investors to diverge materially from the 75 bps of easing priced in by year-end, and the predominance of a data-dependent view may very simply delay any larger dollar and broader FX moves to the first half of April when key US figures for March are released. 

We would not be surprised to see a modestly stronger Dollar into the FOMC announcement and DXY to end the week close to 104.00.