- Bank of America analysts predict that the Federal Reserve
will opt to increase interest rates again in September.
- Despite the June CPI falling below expectations and the Fed’s repricing, analysts maintain their optimistic forecasts for the dollar’s appreciation in 2023.
- Investors have reportedly poured $14 billion into stocks ahead of the Fed’s decision.
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Bank of America analysts anticipate a rise in interest rates by the Federal Reserve in September, and maintain a bullish outlook on the dollar for 2023, despite lower-than-expected June CPI and the Fed’s repricing. Investors have also heavily invested in stocks ahead of the Fed’s decision.
Bank of America Analysts Remain Bullish on Dollar
According to a report by the Wall Street Journal, foreign exchange analysts at Bank of America continue to hold a positive outlook for the dollar’s value in 2023. This optimistic forecast persists despite the Consumer Price Index (CPI) for June falling short of expectations and the Federal Reserve’s repricing. The analysts argue that economic events will pose challenges for the Fed, which will in turn provide support for the dollar. They predict that the real policy rates in the U.S. will remain positive and maintain the highest position among the G10 countries until 2024.
Challenges to the Fed’s Expected Dovish Stance
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The analysts at Bank of America point out potential challenges to the Federal Reserve’s anticipated dovish stance, including inflation expectations and the easing of financial restrictions. According to their analysis, the projected value for EURUSD at the end of the year is 1.05, while for USDJPY, it is 145.
Investors Pour $14 Billion into Stocks Ahead of Fed Decision
Based on EPFR data, a report published by Bank of America on Friday reveals that investors have heavily invested in stocks and bonds during the week leading up to Wednesday. Ahead of policy announcements from the Fed, the European Central Bank, and the Bank of Japan, there has been an influx of $13.8 billion into stocks and $11 billion into bonds. For the first time since August 2022, there has been an entry into Treasury Inflation-Protected Securities (TIPS).
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In conclusion, despite certain economic challenges, Bank of America analysts maintain a positive outlook for the dollar in 2023. They predict that the Federal Reserve will increase interest rates again in September. Furthermore, investors have shown confidence by heavily investing in stocks and bonds ahead of the Fed’s decision.