Is the FED’s prediction of three rate hikes this year a case of once bitten, twice shy?

Janet Yellen, the Chair Lady for the Federal Reserve indicated at the end of 2015 there would be as many as four US interest rate hikes during 2016. In the end, only one of these hikes materialised. Despite my eyes rolling every time I hear the term forward guidance, I think this time Yellen’s predictions may have more credibility. Her predictions in 2015 did not take into account the uncertainty surrounding the US election which has serious effects on the US economy.

Although the FED is meant to act as a separate entity to the government, I am sure this had bearing on the decision to hold rates.

With Trump due to take power shortly and strong data releases across the board in the US I am confident there will be further rate hikes in 2017. This does not bode well for US Dollars buyers so it may be wise to not procrastinate too long over conducting your trade.

FOMC Minutes could influence Dollar value this evening

This evening is the federal open market committee meeting. It reviews economic conditions and looks at whether current monetary policies are proving effective. If the FOMC give an indication as to a change in policy due to a fluctuation in economic conditions, expect investors to react and dollar prices to shift. As I mentioned earlier I think current data coming out from the US will remain strong and as a result, this event could cause further US dollar strength.

Non-Farm Payrolls to take centre stage

Non-Farm payrolls takes place on the first Friday of every month and historically causes big swings in US Dollar value. It gives a figure as to the number of new jobs created during the previous month in everything except agriculture. If you have to buy US Dollars short term and wish to take the risk out of your trade, the safe option is to move before non-farm figures are released.

Political and economic uncertainty could prevent the FED from raising interest rates this year, in the same way it did in 2016. Those with a US Dollar selling requirement may wish to capitalise on the decade highs against Sterling, in the event that no further hikes materialise. Call our team on 01494 725 353 or email me here if youd like to retrieve a free quote.


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