After Yellens speech yesterday it would appear that a hike in June is looking increasingly unlikely. With so many political events ahead, will the FED find a good time to hike rates this year at all?
Despite unemployment rates falling yet again, very few were expecting the Non-farm payroll figures that were released on Friday.
Figures came out at 38k, 128k less than anticipated. Last month’s release also saw huge slumps but nowhere near the levels recorded on Friday. The impact this had on the Dollar was noted across a number of major currencies, par Sterling.
At this stage it would appear that the more damaging aspect of these figures are not the figures themselves, but the ramifications they have on the odds of a hike.
Last year when the US economy was thriving, Yellen held back on a hike due to “Global” factors which leads me to believe that the odds of a hike this year are looking less promising, and her speech from yesterday mirrored these words.
There are those that hold on to a potential hike in September, US economic data points towards improvements but will the FED gamble 2 months prior to the US election?
Although Trump is known for his controversial comments and lack of political knowledge he is a popular choice for presidency, Clinton on the other hand would be viewed as a safer option for the economy given her ties with wall street and knowledge of politics. It is however becoming more evident that Trump has just as much a good chance for the Whitehouse.
We must also ask what of the EU Referendum? If the UK leave how will Yellen react to the uncertainty? How will it impact the rest of the EU and how will Yellen view this as a global factor?
December would appear the most likely time to raise rates but this again could be contingent on the outcome of US election. If Trump was to win the election the odds of a hike could be less likely than if Clinton won.
It also depends on the economic situation at the time, Yellen is focused on reducing unemployment rates before hiking rates. Although the economic releases support lower unemployment rates, there does continue to be global factors that could make her nervous.
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