FXStreet (Delhi) – Research Team at Danske Bank, has revised down their expectations for the number of Fed hikes and they now expect three hikes in 2016 (previously four) while they still expect four hikes in 2017. Key Quotes “The reason we now expect one hike less next year is due to US activity data having surprised on the downside recently and the poor risk environment (especially the low oil price). We still see a risk of the Fed coming behind the curve but we do not expect this theme to materialise before H2 16 at the earliest.” “We continue to believe that the markets underestimate the number of hikes going forward; thus, there is room for short-term yields to rise. Therefore, our forecasts for US rates remain above the forward market but we see most of the increase happening later in the spring of 2016.” “A Fed rate hike and dovish non-US central banks would drive modest USD strength in 1-3M. However, EUR/USD is likely to stay within recent ranges on 1- 3M before a sharp EUR rally occurs in 6-12M on a strong eurozone recovery and valuations. We expect USD/Scandies to rise near term on policy divergence before heading south in H2 16 on fading rate divergence and fundamentals.” “Heading into the Fed meeting this week, we are overweight Europe and underweight the US. This has been our position throughout 2015 and in local currency this has proven to be right. However, if the Fed were to deliver a dovish hike and lead an uptick in EUR/USD to 1.15, we would reconsider our position.” For more information, read our latest forex news.