FOMC minutes hint towards interest rate hike

Yesterday evening the Federal Open Market Committee (FOMC) gave further indication that a rate hike is on the horizon and I quote might be fairly soon however the minutes did not outline any new key information we did not already know. Chairlady of the Federal Reserve Janet Yellen, has identified in recent weeks that if the Federal Reserve hold off and continue to leave interest rates at 0.75% this could have a detrimental long term impact on the US Dollar.

Personally I believe the FED have been buying themselves time due to the uncertainty President Donald Trump has created. However with the President indicating tax cuts are on the horizon which in turn would entice spending and therefore higher inflation it’s now getting to a stage where the FED will have to act or suffer in the years to come. My prediction is that as long as economic data continues on a similar path to present, the FED will hold off for one more month and the first hike will occur in April.

Should I buy my US Dollars now or later?

As I have outlined in the sterling section of this report Theresa May plans to start the process of leaving the EU towards the end of March and I believe this will cause the Pound to fall further against the US Dollar and I would not be surprised to see GBP/USD exchange rates fall below 1.20. Couple this with a potential rate hike of 0.25% within the next three months I find it difficult to how the Pound is going to make any substantial gains therefore purchasing Dollars up front may be wise.

Economic data releases for the remainder of the week to look out for that will have a direct impact to US Dollar exchange rates are Initial jobless claims, housing price index both released at 1.30pm tomorrow and new homes sales and Baker Hughes oil rig count released Friday at 1.30am.

To learn more on how an upcoming US interest rate hike could affect your US Dollar buying or selling requirement, speak to a member of our team on 01494 725 353 or email drl@currencies.co.uk and Ill be happy to assist you with any questions you may have.

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