Buy dollars - Scotiabank

Analysys at Scotiabank explained that the USD is strong, pulling the DXY to its highest level since 2003 in the wake of the Fed policy statement.

Key Quotes:

"The FOMC delivered the expected 25bps rate increase—to follow up on last year’s tightening—but caught most market participants by surprise in taking a more constructive view of the outlook. Policy makers sounded more confident in attaining their goals and lifted the median dot plot for the Fed funds target in 2017 (implying the likelihood of three rate increases next year, from two) and beyond."

"The Fed reiterated that policy normalization will proceed at a gradual pace; but this is a path that the market had been reluctant to follow beforehand and the Fed’s confidence is forcing a further re-pricing of the short end of the curve to reflect tighter policy risks."

"This translates into a stronger— potentially significantly stronger—USD via higher US rates and widening interest rate differentials. Note that the Fed stressed that Wednesday’s decisions were made on the basis of the current assessment of the economic outlook."

"Chair Yellen implied that additional fiscal stimulus under the Trump administration might require rates to move up more quickly. The North American calendar is full today—housing, regional surveys, CPI, weekly claims, etc in the US, Gov. Poloz speaking in Canada and Banxico expected to tighten in Mexico. Buy USDs."

US dollar index hits 14-year high in the Fed aftermath