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You are here: Home / US Dollar / US GDP all but guarantees an interest rate hike

US GDP all but guarantees an interest rate hike

October 30, 2017 by Ben Fletcher

US GDP all but guarantees an interest rate hike

At the end of last week the latest Gross Domestic Product (GDP) figures for the United States were reported and beat the expectation by 0.5%. Compared to Quarter three last year there was expected to be 2.5% growth however the latest GDP growth figure was 3%.

This has come as something of a surprise considering the recent hurricanes in the southern states of the country that caused so much disruption in the last few months. There was an expectation that this would have an negative effect on the GDP data however that obviously not the case.

The other significant thing to consider is this data will near enough cement an interest rate hike before the end of this year. The Federal Reserve have flirted with a December hike in the last few months and have put the chances of the hike down to economic data. Now that there has been a series of positive economic releases its very unlikely there wouldn’t be a rise in rates.

What will happen to the GBP/USD exchange rate?

The GBP/USD rate dropped into the 1.30s on Friday which was the first time in 6 weeks. If the US positivity continues I would expect the rate to stay there. If the Bank of England choose not to raise interest rates on Thursday, which I would suggest is expected, then the GBP/USD rate could fall below 1.30.

Goldman Sachs suggested in a report earlier this week that the US will experience growth issues in the next few years however that is clearly not setting in just yet.

If you’re looking to sell US Dollars then there could be a great opportunity just around the corner. There is a jam-packed week coming up with so much data being released and major events on the cards so expect to see major volatility for exchange rates in the next 5 days.

Filed Under: US Dollar Tagged With: GBPUSD, Gross Domestic Product (GDP), interest rates, US Dollar strength, US interest rate

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