How much higher will US interest rates go?

GBP to USD Forecast: Disappointing CPI Data Gives the Pound a Headache

This is a key question for the global economy since the US dollar and the US economy has a significant impact on financial markets. With interest rates in the United states expected to be raised this evening, the US economy will continue to have the highest interest rate amongst the world’s leading economies.

The US dollar has been closely monitored of late as concerns mount over the possible negative effects of a higher interest rate on emerging market economies. Many countries like Argentina and Turkey have captured headlines lately as their economies struggle and their currencies plummet in value. Unfortunately, they have taken on many loans in US dollars which now need to be repaid at a much higher rate, compounding the misery and the problems.

For clients looking to buy or sell US dollars, such news could provide some very interesting opportunities for the future. News such as this has previously caused the US Dollar to rise in value because of the negative impact on emerging market currencies.

As a safe haven currency the US dollar will appreciate in value in times of uncertainty such as this. With emerging market economies struggling to repay debt, it raises concerns about the wider detrimental effects to the global economy.

Whilst the US dollar remains strong there are concerns over just how high the Fed can raise interest rates before it begins to have a negative impact on its own economy too. After years of low interest rates fuelling economic growth, the Fed does not want to negatively impact the economy by putting the brakes on too early and doing more damage than good.

The Fed are very likely to raise interest rates this evening but be weary of the economic consequences. Any hesitation from the Fed would see the US dollar lose ground, and sharply as markets do appear poised to see when this great run of form will end.

For insight into the above factors and how they could impact cable exchange rates, feel free to get in touch using the form below. I will be happy to contact you personally and discuss your requirements.