Credit Agricole CIB Research argues that the Fed's message from its March meeting actually comprised a pretty optimistic view on the market but without interpreting into any significant upgrade to projections.
As such, CACIB expects the USD pullback to be comparatively short-lived. CACIB outlines the following 3 reasons behind this view.
1- FX markets happen to be lagging rates with the USD trading at levels below the ones that could be warranted by rate differentials.
2- Rates markets are still under-pricing the 2018 and in particular 2019 dots.
3- The USD is now comfortably the third highest yielder in the G10 implying that running USD shorts is expensive at current levels.
USD Index is trading circa 100.41 as of writing.
Source: Credit Agricole CIB ResearchOriginal Article
