HSBC Research marked to market its FX forecasts to reflect a stronger USD for longer on the back of this week's June FOMC meeting.

"The USD has strengthened following the June FOMC meeting, which showed policymakers are split on whether a shift to rate hikes may be needed this year. While that even split could be read as a "neutral" outcome, the rise in front-end US yields and the USD suggests markets interpreted the message as more hawkish than expected...An important takeaway from both the summary statement and Chair Warsh's press conference was that the FOMC is unambiguous in its pursuit for price stability. Warsh explicitly ruled out re-examining the Fed's current inflation target," HSBC notes.

"We believe the lack of forward guidance and more focus on inflation keeps the Fed rate hike scenario alive. This in turn is favouring the USD from a rates differential perspective, as market pricing for Fed hikes has continued to build but pricing for hikes elsewhere has receded due to the recent fall in oil prices...We subsequently update our FX forecasts, reflecting an elevated broad USD across our forecast horizon," HSBC adds.