Will the US raise interest rates this year? With so much global uncertainty, mixed economic data and the US election, it's difficult to determine whether the FED will hike rates until later in the year. During yesterday's trading day GBPUSD exchange rates fluctuated 0.76%, a difference of $2,200.00 on a £200,000 purchase.
The next interest rate decision in the US is on the 15th June and analysts believe that we could be getting close to the next interest rate hike if inflation and economic growth continue to strengthen.
More speculation was added to the fire regarding a possible interest rate hike yesterday when two members of the FED hinted that the ‘Brexit’ could have implications for the US. The most likely outcome is for the US to wait until the outcome of the EU referendum is known, and will likely look to raise interest rates in September.
However, overnight the FED’s Harker said that he could see 2, even 3 rate hikes this year, continuing the hawkish tone following last week’s US Fed statement.
Calls for a June rate hike will be closely linked to economic data and yesterday did little to help the cause as manufacturing data for the US was worse than expected. Today, US new home sales are set to show continuing improvement, with nearly 13,000 new homes being built in April compared to the month before.
This week could set the tone for whether the US will raise rates in June or hold off until September. Initial jobless claims, Gross domestic product and Durable goods orders will provide a good insight into whether the US can afford to raise interest rates in June. All eyes will turn towards Fed Chair Janet Yellen on Friday. Any comments will be scrutinised after the probability of a rate hike shot from 5% to 30% last week.
Therefore, if this data does point towards a rate hike, it may be worth looking into fixing the rate using a forward contract, with a small deposit.
A number of key economic releases this week may increase the odds of a hike in June, we therefore advise that you get in touch with us to discuss your options. Email me at firstname.lastname@example.org.
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