Fed takes cautious approach

US fixed income markets rallied on Fed's rate hike news and might be able to rally further short term. With the Fed set to hike rates in December US rates to move higher again in coming months. With regard to the euro area, Fed's meeting should add strong support to 10Y bunds. 

The FOMC delivered an overall dovish message to markets. The FOMC confirmed its bias to err on the side of caution. 

"The Fed will be able to tick the boxes for a first rate hike in December but October is too early. In the very short term, USD could still suffer slightly on the dovish Fed stance. However, with the Fed still projected to hike later this year, USD is still expected to outperform the other majors, such as EUR, JPY and GBP, in coming months", says Danske Bank. 

The dovish Fed as short-term bearish for EUR/SEK and EUR/NOK on increased risk appetite but likely monetary actions should mitigate any sustained sell-off.

"The emerging market FX rally to be short lived, as the Fed is likely to raise rates in December", added Danske Bank.