Fed preview: Risks around the USD are more balanced than a month ago – TD Securities

The two-day FOMC meeting started on Tuesday. The Federal Reserve is expected to announce no changes to its policy. Market participants will look into the language for clues about the future path. According to analysts from TD Securities, in the most likely scenario, the Fed will make limited changes to the statement, with some acknowledgment of progress in the QE forward-guidance section. Despite the recent increase in COVID-19 cases due to the Delta variant, they don't expect the FOMC to explicitly flag this risk in the statement.

Key Quotes: 

“We expect Chair Powell to communicate that the recovery remains broadly on track and that more progress is expected. Powell will likely acknowledge that the Committee has begun discussions about tapering plans, but that reaching the standard of "substantial further progress" remains a "ways off".”

“Market priced for a cautiously optimistic outlook, but could bear flatten on a hawkish message.”

“In what should largely be viewed as a placeholder meeting, we think risks around the USD are more balanced than a month ago.”