The US Fed Reserve has already hiked interest rates three times so far this year, bringing the total up to nine rate hikes since the Fed began this period of US monetary policy changes in December 2015. The current base rate of interest in the US is 2.25%, which is higher than the offerings of all other major currencies. The FED plans on hiking interest rates once more before the end of the year, and whether they carry out these plans is likely to impact USD exchange rates between now and then.
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Last week it emerged that in the third quarter of this year, US GDP grew at an annualised rate of 3.5%, which is impressive. The unemployment rate is also running at an eleven-year low and market analysts are expecting to see US wage growth exceed 3% for the first time since 2009. If wage growth hits this target I wouldn’t be surprised to see the USD strengthen further, this data will be released on Friday afternoon along with a barrage of other US related data.
A potential downside for the US and also the FED’s monetary policy plans is the recent stock market sell-off. The major US equity indices haven’t sold off to the extent that emerging markets have, especially China’s, but the sell-off could alter the FED’s plans if it signals a slowing of the global economy.
US President Donald Trump has blamed the falling stock markets on the FED’s aggressive interest policy changes, although the members of the FED appear unperturbed by his comments and markets expect to see the final hike for 2018 take place.
US politics has taken centre stage recently with the mid-terms taking place in just over a week. The political climate has been tense and President Trump will be very keen to win the Senate and House of Representative votes in order to continue his political agenda.
This week economic data is likely to be the main driver of USD exchange rates, as Unemployment data and Non-farm Payroll figures will be released at 12.30pm UK time on Friday. Average earnings will also be released on Friday so our readers and clients have plenty of time to get in touch with us if they wish to plan around these key data releases.
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