Federal Reserve Interest Rate Decision
It had been almost certain US interest rates would rise at tonight’s Federal Reserve Interest Rate decision. It has been justified by the requirement to tackle inflation and normalise monetary policy. Donald Trump however has been openly critical of the proposed hike.
Trump has posted the following on Twitter this week:
I hope the people over at the Fed will read today’s Wall Street Journal Editorial before they make yet another mistake. Also, don’t let the market become any more illiquid than it already is. Stop with the 50 B’s. Feel the market, don’t just go by meaningless numbers. Good luck!
— Donald J. Trump (@realDonaldTrump) December 18, 2018
The Federal Reserve is obliged to act as a separate entity to the US Government, but that has not stopped book makers altering odds to show there is now a 25% chance the hike will not go ahead.
I am of the opinion the rate hike will go ahead by 0.25% to 2.5%. I would not expect huge movements on GBP/USD however. The market moves on rumour as well as fact and I believe the rate hike is largely already factored into current GBP/USD exchange rates.
Could the FOMC press conference cause US Dollar weakness?
The big news that investors will be waiting for is the Federal Open Market Committee (FOMC) press conference. This can often give a hint to monetary policy moving forward and this particular press conference could create high levels of volatility. It was predicted earlier in the year that next year could see as many as three hikes by the Federal Reserve in 2019. There are rumours circulating this figure could now be brought back due to global economic uncertainty. If this is the case we could see US Dollar weakness.
Brexit still a key driver for GBP/USD rates
A lack of clarity surrounding Brexit has held back the Pound for some time. I still believe this will be the key market mover on GBP/USD for the foreseeable future so the press conference may provide a limited window of opportunity for those wishing to sell Sterling and purchase the US Dollar.
If you have a large currency exchange to carry out in the coming days, weeks or months then you are more than welcome to speak with me directly as I will be more than happy to help you both with trying to time a transaction and getting you a highly competitive rate when you do come to buy your currency. A small improvement in a rate of exchange can make a huge difference so for the sake of taking two minutes to send me a message you may find you save yourself hundreds if not thousands of Pounds.
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