Last week’s decision by the US Federal Reserve to raise interest rates to 1.25% came as no surprise to the markets, however the upbeat tone that ensued has helped the American markets and the US Dollar to strengthen.
This surge continued last night as Federal Reserve Bank of New York President William Dudley, an influential official announced that US inflation should rebound in line with wages in the US and allows for the Federal Reserve to continue raising interest rates this year. Personally, I am of the opinion that the US Federal Reserve will raise interest rates once more this year.
Today’s speech by Fed vice-chair Stanley Fischer will be of particular interest, specifically I’m looking to see if his views align with those of Mr Dudley. If this is the case, I would expect sentiment regarding another rate hike in the US to solidify and this could turn into USD strength.
For those with a Sterling or US Dollar requirement, these are now interesting times. The Pound remains under pressure from political variables, with Brexit negotiations and political uncertainty being the key drivers for the Pound’s value (and currently not doing much to help either) I would expect USD buying rates for those with Pounds to get worse before they get better.
Data is light at the minute in the US, however Thursday sees the release of Initial Jobless claims data. This will be closely watched following comments that the US economy is at full term employment, allowing it to raise interest rates in light of poor inflation. Therefore any figure that deviates from the 240,000, either positive or negative could pose more questions for the Federal Reserve and when to raise interest rates. If this figure is stronger than anticipated I would expect the Dollar to improve against most major currencies.