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Morgan Stanley joins Goldman Sachs in 11th-hour switch to forecasting a Fed hike
MarketWatch reports Morgan Stanley changed its call on the Fed, moving from expecting rates to be left unchanged to forecasting an interest-rate hike.
MarketWatch reports that Morgan Stanley has changed its stance on the Federal Open Market Committee, moving from a view that rates would be left unchanged to a forecast that the Fed will hike. The piece also notes this follows a similar shift by Goldman Sachs.
For FX traders, the immediate relevance is through how expectations for near-term US policy translate into Treasury yield pricing and the perceived interest-rate differential versus other economies. Changes in expectations can alter both the expected level of US yields and the forward curve, which in turn influences currency demand via the interest-rate channel.
What matters next is whether additional central-bank communication or incoming US macro data confirm the higher-probability hike view, or whether the market instead treats it as a temporary adjustment. Traders should also watch for how broadly other major institutions converge or diverge from the same forecast path, as that can reinforce or dilute the repricing of rate expectations.
Why this matters for FX
A shift in major Wall Street expectations for the Fed’s next move can quickly reprice interest-rate differentials and Treasury yield curves, which are key drivers for FX valuation. Even without new official data in the item, a bank’s change in policy-forecast feeds into market expectations for the path of US rates, affecting the USD via interest-rate and risk-premium channels.