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FOMC Statement

–    The Fed still expects downward pressure on inflation to fade

–    Recent global developments are likely to put downward pressure on inflation

–    Fed still expects inflation effects to be transitory

–    Recent additional decline in oil and USD appreciation mean it will take time for effects to dissipate

–    First rate hike will be appropriate when we see further labour market improvement and inflation moving back to target

Bank outlooks

For the best profitability major banks have identified pairs and currencies most vulnerable to the Fed decision.

Goldman Sachs

Into the FOMC, GS identifies EUR and European currencies to be the best longs against USD when playing a dovish surprise.

Beyond the FOMC, even with the dovish Fed causing a USD sell-off, the Dollar will rise again vs EUR and JPY, as both the ECB and BOJ are expected to take additional easing steps in the coming months.

Deutsche bank

DB represents the FOMC outcome possibilities as follows.

70% chance of a “hawkish hold.” The Fed will leave the hike on the table for October. As a result, few weeks of stale USD longs might follow. Best bet to buy USD dips before the October FOMC.

20% of “dovish hold,” when the Fed does not clearly identify October. Further rally for couple of weeks of AUD and ZAR is expected.

10% of either dovish or hawkish hike. Rout of risk appetite that is very USD positive follows.

Danske Bank

In case of a hawkish Fed, DB advises to buy USDJPY or sell GBPUSD as an alternative. However, Yen has higher risk/reward perspective.

In case of a dovish Fed, the best position would be to long EURUSD.

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