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You are here: Home / US Dollar / Strong US data raises odds of FED hike

Strong US data raises odds of FED hike

August 8, 2016 by Rob Lloyd

Strong US data raises odds of FED hike

Traders put FED hike at 47% in December

janet yellen of the FEDFriday’s Non-farm payroll and employment data has put the odds of a hike in December to 47%, according to traders.

Whilst the news is positive for global markets, current GBPUSD rates remain close to their 30 year lows with a FED hike potentially weakening levels further.

The main driver of US Dollar strength recently has been the UK’s vote to leave the EU, the concern was that Brexit would impact global markets, this has not rung true for the US economy. However it could be too early to tell, although if data continues to bare positive, the FED could pull the trigger on a FED hike by the end of the year.

Could the FED raise hikes in September?

Although its possible, whilst current data remains positive the FED may want to wait and see, given the fallout of Brexit is yet to be felt across the board. With the upcoming US elections, it does look likely that the next window of opportunity for a hike will be in December.

How could this impact exchange rates?

A FED hike this year could have significant implications for GBPUSD exchange rates, given that Brexit will not official begin until next year, a rate hike this side of Christmas could put rates closer to the 1.20 range. And with more economic releases due for the UK before this, I would be conscious that current rates of exchange could get worse.

It is also possible that the Bank of England may cut rates again before Christmas, if the data supports it. I would therefore consider making an exchange this week, more economic data for the UK next week could put further pressure on the Pound.

Filed Under: US Dollar Tagged With: Federal Reserve Bank of America, GBPUSD, US interest rate

The information on this website is provided for information purposes only. It does not constitute advice to any person on any matter. Every reasonable effort is made to ensure that the information is accurate and complete but we assume no responsibility for and offer no warranty with regard to the same.

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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