Clarity needed on the possibility of a FED rate hike

This week the annual Jackson Hole Symposium takes place. It is a forum for central bankers, policy experts and academics to gather together to voice their opinions on the economy. The Jackson Hole event has been used as a platform for the Federal Reserve to provide more clarity to the markets and warn about upcoming policy changes. Clarity is needed, as it is currently very unclear as to whether there will be a rate hike by the end of the year.

At the end of 2015 Janet Yellen, the chair lady of the Federal Reserve indicated that there would be several rate hikes throughout 2016, none of which are yet to materialise. This could be attributed to Brexit, the presidential election and global economic uncertainty. Yellen has a stellar opportunity this Friday to send a concise and clear message to investors. Many currently believe a rate hike is likely in March next year. Yellen has indicated that she would like to introduce a rate hike before. It will be interesting to see if she adamantly expresses this stance and how the markets will react.

Presidential Election to cause volatility for the Dollar

Hilary Clinton currently leads in the polls and she is seen as the safer bet on an economic standpoint. This could explain why USD is looking strong against the majority of major currencies. Trump’s outlandish views and statements would do little for investor confidence. Political uncertainty historically causes the currency in question to weaken so if we see an increase in Trump support as the election draws closer expect the US Dollar to fall in value. It is currently an incredible time to be purchasing Sterling with USD. At present we sit at a thirty-one year high.

PMI and GDP figures will give an indication as to the health of the US economy

Tuesday brings manufacturing PMI and is a barometer as the stability of an economy. This is followed by Services PMI on Thursday. I think we could see a slight improvement. Friday is GDP and again I expect to see a slight improvement. If you are buying USD short term it may be wise to move sooner rather than later.

On Friday, Yellen may provide clues to when an interest rate hike is forthcoming which could strengthen the US Dollar. Stay in touch with your broker over the coming weeks if you have an upcoming currency transfer to action.


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