Will the FED raise interest rates by 0.25% or 0.5% - or not at all?

Throughout the course of yesterday the US Dollar strengthened against its major counterparts as investors moved their assets ahead of one of the most eagerly anticipated interest rate decisions in recent years. Almost 1 year ago to the day, the FED had suggested that they would raise interest rates 4 times throughout the course of this year, however so far none have materialised through fear of moving too quickly.

The Federal Reserve last raised rates from 0.3% to 0.5% on 16th December 2015 for the first time in 7 years, and so another hike was always going to be considered with caution. However, with economic growth consistently and steadily improving throughout the course of the year, I would expect that now is the time for the FED to act.

It is widely expected that they will increase by 0.25%, however a jump of 0.5% is also on the cards. I believe the markets have fully priced in a rise of 0.25% which would limit large currency fluctuations to some extent, however any deviation from this, or any hints towards future policy changes has the capacity to cause huge swings on US Dollar rates.

How can I trade out of hours?

After raising rates last December, and following on from the FED claims that they would look to raise rates 4 times in 2016, GBP/USD rates moved by 4 cents making a $200,000 purchase over £3,500 more expensive. As this release is outside of trading hours at 7pm, any clients with a US Dollar requirement could benefit from one of our Limit Order contracts. This is where we can automatically purchase your currency as soon as the rate reaches the level you require. Please feel free to get in touch with one of our experienced brokers to find out more about the many contract options we offer to help you get the most from your money.

Further movements for GBP/USD could present themselves depending on the outcome of todays US interest rate decision. Clients may wish to get in touch with their broker to secure their currency position on 01494 725 353. If you do not have an account with us at Foreign Currency Direct, you can sign up for free here.


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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.