ING FX Strategy Research notes the Fed bullish May statement has allowed for market expectations of almost two rate hikes this year to remain intact.
However, ING argues that the upcoming Fed tightening is unlikely to translate into broad-based USD strength.
“Rather, one should be selective in USD longs. We favour long USD/JPY given the crystal clear monetary divergence between the Fed and BoJ. In contrast, the downside to EUR/USD seems very limited,” ING recommends.
USD/JPY is trading circa 112.90 as of writing.
Source: ING Global Markets Research
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