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    Staying neutral on the big dollar, expecting hikes to come in 2016 still - UOB

    Analysts at UOB Group explained that their economist’s view is that they keep their projection for the US Fed policy trajectory to two 25bps rate hikes in 2016.Key Quotes:"But we now factor one hike in 3Q and another in 13/14 December FOMC meeting.""Assuming our base case scenario for the UK to ultimately vote to stay in the EU comes to reality, we accord a 50% chance for a rate hike in 26/27 July FOMC, higher compared to market expectations of less than 10% (as of 15 Jun).""If July does not materialize, then we expect the hike on the Sep FOMC (75% probability versus markets <30%, as of 15 Jun) and that would mean even more data to digest & Yellen’s Jackson Hole speech to decipher in late August.""On FX strategy, we see the overnight dip in dollar fairly muted considering the statement was more dovish than expected.""The dollar index DXY was only down 0.3% to 94.60. Compare this to the 1.8% drop of May’s non-farm payrolls two week back and the 0.9% drop during March’s FOMC where the dot plot was lowered. No doubt that the USD could be more vulnerable on the downside going forward, but for now we prefer to be neutral on the big dollar."

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