Janet Yellen – Chairlady of the FED – made a hawkish statement at the Jackson Hole Symposium briefing last week. If economic data continued to trend positive the FED would look to raise the country’s interest rates in the very near future.
Investors bought into the US Dollar in the hope that one would be coming in September possibly December at the latest. Today’s Non-farm payroll data and Unemployment data were being watched with scrutiny as a signal for the FED to act.
Figures released today came in much worse that anticipated, 151k, a far stretch from the 180k predictions. Especially given that last month’s data saw huge rebounds from May’s release.
And whilst unemployment has risen a small .1% since the last release, the data today would be playing on the FED’s decision especially given the upcoming US elections.
GBP/USD exchange rates have moved up to a 4-week high as a result of today’s release, sitting on the fence of 1.33. But more importantly what implications does this have on the FED’s decision to increase rates?
Will the FED raise interest rates this year?
In my US Dollar report yesterday, I explained that today’s Non-farm payroll data would most likely be weaker than markets predicted. Coupled with the US elections in November, I personally do not see the FED hiking interest rates in September. That does however leave room for one in December, but this is entirely data dependent. If we continue to see poor data like today, I do not see the FED moving rates until 2017.
Off the back of today’s data, I am expecting further movements for GBP/USD in the weeks ahead. As we approach the US elections we could see GBP/USD exchange rates near the 1.40 mark. These rates however, may not be around for long given the outstanding Brexit and the UK’s official withdrawal from the EU.