Exchange Rate Forecast

Exchange rate forecasts and foreign currency news

Analysts predict 90% change of December US interest rate rise

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Janet Yellen’s last day nears

Janet Yellen, the current Chairlady of the Federal Reserve made an appearance at New York University on Tuesday night, just weeks before the all-important Fed interest rate decision in December, where investors are pencilling in another interest rate rise in the US.

Janet Yellen gave nothing new away with regards to the Federal Reserve’s interest rate plans and left investors scratching their heads as to whether interest rates would be raised. Janet Yellen cited inflation as a major concern to the Federal Reserve and is something that many of her colleagues (herself included) can’t agree on. Markets still had the probability of a 0.25bp rate hike unchanged this morning, however these comments can’t be ignored – and as a result the US Dollar started the day ever so slightly weaker against a basket of currencies.

The US workforce shows positive signs

US jobless claims, which is the number of civilians filling for unemployment benefits fell this week after two straight weekly increases. This points to a healthy looking work force and job growth after the fallout from the recent hurricanes in the United States fed through into the labour market. Benefit claims had risen recently following a backlog of claims from Puerto Rico following damages to infrastructure also damaged by the two recent hurricanes.

FOMC minutes

Tonight at 7pm UK time the latest FOMC meeting minutes will be released. Recent reports ahead of the minutes being released have indicated that the US is likely to raise interest rates at December’s meeting, with J P Morgan putting an interest rate hike next month at 90%. An extremely productive labour market in the US is likely to outweigh any inflationary concerns, according to reports. Today’s jobless data certainly helps solidify this, but will the FOMC minutes tonight clarify this and the interest rate scheduled for December?

Host of data releases for the US due this week

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Tomorrow will bring the first of several data releases this week for the US with Consumer Confidence data for October and August’s Housing Price Index. Wednesday will bring Purchasing Managers Index for along with New Home Sales and Trade Balance Data.

Thursday will see the major release of Durable Goods Orders and Initial Jobless Claims followed by Gross Domestic Product data on Friday. The US economy is under major scrutiny currently as the world awaits a potential interest rate hike. Good news for the US is considered as the key to whether or not there will be a hike.

US Election Final Stages

The race to the Whitehouse enters its last 2 weeks as both Trump and Clinton attempt to convince voters. Many might think it’s an astonishing achievement that Trump is going to manage to make it to the end of the race, considering he was 100/1 to win the election at the start. Moving forwards there will no doubt be a few more fireworks over the coming weeks and I would not be surprised to see a shock result.

The fact Trump is still close to Clinton in this race suggests there is still fuel in the tank and his supporters believe he can win it. If there was to be a late surcharge from Trump I believe the USD could fall as the world becomes a slightly more uncertain place. Trump has implied he could introduce some uneven policies with many investors likely to be apprehensive of the future.

I still believe it is very plausible that Trump could win this election by a small margin. The shock result could have a bigger impact than the Brexit has had on Europe and may provide some Sterling strength. If you’re a USD seller I would consider thinking about your options as we could start to drift away from the 31 year lows.

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