Janet Yellen – Chairlady of the FED provided a hawkish statement at the Jackson Hole meeting on Friday. Investors have been waiting since December 2015 for signs of a FED hike this year which were initially 4 in total. The US economy has been performing well in recent months, economic data appears to be following a positive trend. Non-farm payrolls have recouped from its May figures, unemployment is low, labour markets are healthy and the growth outlook is improving. Yellen will be looking at economic data over the coming weeks and may trigger a hike as early as September.
But will she hike rates?
I do remain skeptical regarding an interest rate hike, whilst the economy is picking up. Yellen has on many occasions followed a similar hawkish stance only to retract from her previous comments later. The FED have also had plenty of opportunities to hike rates in previous years.
Whilst it is not in the FED’s duty to mingle with political events, the upcoming US elections must be having an impact on their decision. Donald Trump remains the wildcard and with the recent Brexit vote anything is possible.
Given the limited market movements on Friday, I am of the opinion that many investors are aware of the FED’s ability to over promise and under deliver.
Friday’s economic data could impact odds of a rate hike in September
With the above in mind, whilst I remain skeptical of a hike Friday’s non farm payroll figures and unemployment data could be a game changer for the FED.
If Yellen is serious about increasing interest rates, she will want to be able to demonstrate that economic releases are consistent and that the global economy is performing.
Friday’s releases could improve the odds of a hike in September, if you are buying US Dollars in the near future, keep an eye on Friday’s non farm and unemployment rates. Not only could these weaken GBPUSD rates, they could open the door to a FED hike which could cripple rates further.