Overall, we believe Fed and Chair Janet Yellen succeeded in being neither too hawkish nor too dovish, which is reflected in the muted market reaction.
The median 'dots' now signal four hikes in both 2016 and 2017, i.e. a total of eight hikes until year-end 2017 (down from nine). To begin with, the unchanged median 'dot' in 2016 was interpreted as a hawkish signal but it hides the fact that most individual 'dots' next year have been lowered.
We stick to our view that the Fed will hike three times in 2016 and four in 2017.
Thus, we still believe market pricing is too soft and see upside risks to US rates.
We think the EUR/USD will be range-bound over the next 3M before increasing towards 1.16 in 12M.
EM investors may start to focus more on the impact of the sharply lower oil and other commodity prices as well as the weakening of the Chinese currency against the US dollar than the Fed's rate hiking cycle.
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