Important decision tonight for all major currencies – Federal Reserve interest rate (Daniel Wright)

Tonight we see the release of the Federal Reserve interest rate decision, press conference and monetary policy statement over in the States.

This can have an impact on all major currencies as it will no doubt alter global attitude to risk and is the main talking point from investors and speculators alike at present.

Should the Fed decide to raise interest rates (of which there appears to be a 50/50 chance) then this may bring confidence to markets which could strengthen the ‘riskier’ currencies such as the Australian Dollar, New Zealand Dollar and South African Rand and give them a good chance of staging a minor fight back.

You would expect that a hike in rates may lead to U.S Dollar strength, making it more expensive to buy as an interest rate hike is generally seen as positive for a currency as it makes it more attractive to investors.

On the flip side to this a common saying on the markets is that when the U.S sneezes the U.K catches a cold so the Pound may see a welcome boost off the back of this.

The Euro may be the one that gets the least benefit from a rate hike as the most traded currency pairing in the world is EUR/USD so if you are seeing a huge flow from Euro to Dollar then Sterling may actually see a nice boost against the Euro.

Option 2 is that the Fed do not raise rates but then comments afterwards suggest that a rate rise is on the cards in the near future, this may have the same kind of impact but during the gap between the decision and the actual press conference there may be some good buying or selling opportunities and quite a lot of volatility.

With this in mind I think limit orders may be a sensible approach this evening, especially for those looking to buy or sell U.S Dollars, Euros or Australian Dollars.

A limit order is where you place a market order for a particular rate of exchange and should it become available, even for a matter of seconds then the currency gets bought out automatically for you. The order is good until cancelled so can be moved or removed as and when you like with a quick phone call as long as it has not already been achieved.

If you would like to discuss these orders in more detail then feel free to call me on 01494 787478 or to email djw@currencies.co.uk and I will contact you with more information.

The third option is that no rate change is announced and the kind of words like ‘patience’ are spoken, which may mean that we have to wait to see any movement from the States, the Dollar and Sterling may weaken a little off the back of this but I would personally be surprised to see this happen.

All in all tonight is an extremely important announcement and I personally feel that no matter what happens we will see quite a lot of market movement.

If you are in the process of buying or selling a property overseas and you are close to your budget then it may be prudent to look at buying some or even all of your currency on a forward contract, removing any element of risk and giving you the comfort that you know exactly what your costs are going to be.

You can email me on djw@currencies.co.uk or call me on 01494 787478 if you do need to carry out a transfer soon.