First US interest rates hike in 12 months

Last night we saw the FED confirm the speculation as they raised interest rates in the US by 0.25% as widely expected. Over the last few month’s economic data for the US has continued to show improvements so this hike had been called for some time. The reason for the delay in doing so was put down to the uncertainly on the next President of the US.

I think that Janet Yellen, the head of the FED, will be keenly watching the twitter account of the President elect which seems to be his broadcasting medium for announcing future US policy’s moving forward. With the sweeping changes that have been promised including a big cut in corporation tax in the US down to 15% over the next 2 years, it seems almost certain that we will see further changes in the months ahead.

It may well have been that the FED would have raised rates by a bigger degree but with speculation growing that there will be a significant increase in spending in the US under Present elect Trump this was halted. The argument being that with all this additional debt that would have been taken on, the cost of managing this debt could climb significantly.

How has the FED interest rate decision impacted the currency market?

Following the first hike this year in the US and only the second within the Western world since the financial crises of 2008, exchange rates have spiked.

There seems to have been an influx of money going into the US Dollar in a hunt for better returns and this change of demand for the majority of major currencies has changed their values and given opportunities for the quick movers.

It would appear that the biggest movement of money has come from the Euro. EUR/USD has fallen by almost 2%. This movement from the Euro has resulted in GBP/EUR levels hitting a near 6 month high.

Markets will continue to remain volatile today as Asia and European markets react to this news. If you have a transfer to make in the next 6 weeks it would be wise to contact us to see how this impacts your situation.

Markets are set to open shortly and the volatile conditions could be set to continue as investors react to last nights decision. Clients with a currency requirement may benefit from getting in touch with their broker as early as possible to capitalise on the news. Call us on 01494 725 353 or email me here if you have not traded with us before and require assistance in signing up.

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