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You are here: Home / US Dollar / FED Interest rate decision this week

FED Interest rate decision this week

June 14, 2016 by Rob Lloyd

FED Interest rate decision this week

GBPUSD weaknessIt’s been a busy week on the market with most of the focus now on the upcoming EU referendum next Thursday. What will be interesting over the next 48 hours is how the FED begin discussions around monetary policy which will be watched with scrutiny by the market.

As of yet, the FED are still yet to fulfil their promise of a first Hike since December with odds narrowing due to a mixture of internal and external economic factors. US economic data has been mixed in recent months with Non-Farm payroll figures providing poor numbers whilst retail sales rose 0.5% in May. One of the key performance indicators for Janet Yellen is the job market which whilst indicates growth, it’s the lowest growth since September 2010. So what’s the likely outcome of the FED’s monetary meeting?

US Interest rate hike in June falls to 2%

We must not ignore the real need to raise Interest rates, over-inflation is not an issue for the US. In fact, inflationary figures from April sat at 1.1%, well below the 2% target the FED aim for.

This alone is likely to make Yellen nervous, and that’s before we’ve even looked at the external economic factors that are likely to impact the odds of a hike in June. The EU referendum next Thursday is causing jitters in the market and in the event the UK left the EU, the uncertainty over such implications will only add further anxiety to the FED’s decision making.

Although not off the table, it’s looking increasingly unlikely that a hike will occur in June. Going by the data alone it does not appear to support a hike and Yellen will be more inclined to hold off until further data supports one. There is always a potential for a hike in July and I suspect that this would be more suitable once the results of the referendum have come to light.

Putting aside the rate hike decisions, this week has seen landslides in GBPUSD rates. In the 7 days Sterling has dropped almost 5 cents against the US Dollar and could well fall into the 1.30’s prior to the EU referendum outcome. A good opportunity to buy Sterling is currently available and will most likely change if the UK vote to remain in the EU.

Filed Under: US Dollar Tagged With: EU Referendum, GBPUSD, Pound Sterling weakness, US interest rate

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About Rob Lloyd

Robert brings with him a wealth of knowledge on what is impacting exchange rates, especially around the subject of the EU Referendum and the implications for Sterling and Euro exchange rates.

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