US data continues to show a mixed outlook denting the odds further of a rate hike in June.
GBPUSD exchange rates are trading at 1.47 – high levels not seen since January, and I expect that rates may peak into the mid 1.50’s if the UK remain within the EU.
Today is a big day for US data, jobless claims followed by durable goods orders have the potential to weaken the currency significantly as well as knock any hope at all of a FED hike in June.
Durable goods are goods that are built to last more than 3 years and often require a large investment, these figures therefore make up a large part of US GDP.
Will the FED hike rates in June?
The odds of an Interest rate hike in June have now risen to 60%, up from 30% previously predicted. I personally believe this percentage to be over-exaggerated. Although the US economy is performing reasonably there are a number of global economic factors that will make the FED nervous.
Yellen had many opportunities last year to raise hikes when the economy was booming, but decided against action due to global economic uncertainties.
If she applies the same thinking to this years’ decision there are many reasons for her to be nervous.
The problems in the Eurozone with Greece, the EU referendum and China are but some of these issues, some commodity prices are also at their lowest levels since the financial crisis of 2008, I personally don’t see a rate hike happening in June. So when will the FED rate hikes?
So when will the FED raise Interest rates?
I continue to hold the view that a rate hike is looking unlikely at all this year, the next decision will be in September – ahead of the US election. Because of this I do not feel the FED will act in the midst of political uncertainty.
Then there is December which I believe is more likely to happen, but could depend on the outcome of the election. Clinton would be a safer bet for the economy whilst Trump would create nervousness and uncertainty. Time will tell but I remain sceptical of a hike anytime soon.