Hi,
As a newbie I would be interested in your opinions please regarding the possible effects on US currency pairs if the Fed increases interest rates on Thursday, as some in the media are predicting.
I’ve read a couple of National Newspapers here in the UK today and their Finance contributors have given conflicting opinions.
One pundit said if rates go up then there is a danger that the US Dollar could ‘spike’. What does this mean?
Another pundit thinks that prices will stagnate due to conflicting data due out earlier in the week relating to US Economic performance.
What do you guys feel may happen yourselves if rates do rise? Will you be tempted to buy/sell US currency pairs, or will you stay way clear as the market could get very volatile?
Cheers
Simon
As i see it is true now since the start of the Depression in the China and the Europe we will see the strength of the US Dollar increasing in the coming times
An interest rate hike could cause the dollar to gain value against other currencies. It could cause investors to feel more confident that the U.S. economy is growing and healthy and thus support a stock rally. But it could just as easily scare investors who think the hike will take too big a bite out of corporate profits and thus cause a further decline in stocks. It could bring bond prices down.
I am very sceptical that a hike will be implemented without any meaningful increases in the CPI.
Yep, a rate hike typically results to stronger demand for the currency (bec of the higher returns in holding that country’s assets) and therefore an increase in value. However, rate hike expectations have weakened for the Fed in the past few weeks because of the slowdown in China, which might lead to a downturn in inflation and prevent the central bank from tightening monetary policy.
Agree 100% with PipDiddy…rate hike = attraction towards higher yielding assets in the US, and thus higher USD. However the bank analysts are split 50-50 on whether the FED will hike or not.
In any case, it’s usually better to NOT trade the decision itself, as volatility and spreads can force you out of the market even if you’re doing something logical. Much better to wait until the dust settles and then take a stab.
i think if Fed raises the interest rates, it really gonna strengthen dollar against other currencies and commodities. it will make dollar denominated instruments way expensive. moreover, it will make the US bonds also expensive. i feel if Fed raises the interest rates and makes statement that its not the only rate hike this year, i believe the commodities can collapse and dollar can also breach the level of 100.
FOMC preview: A Fed rate hike is what the world needs to begin normalising
Marcus Ashworth – Head of fixed income at Haitong Securities – joined Nick Batsford ahead of the FOMC meeting later this week, to discuss whether we are likely to see a US interest rate hike. Are the markets prepared? With the majority of investors now anticipating a rate hike before the end of the year, Ashworth questions whether the market has been braced enough for a potential hike this month. While he believes that it’s what the US economy needs to begin normalising, he believes that it is a big gamble that the Fed are looking to avoid for the time being.
I also believe this fact that Fed is not going to raise the Interest rates in the September after the slowdown in the China and the slump in the Gold prices
Every increasing of interest rates will be appreciated of the US Dollar and it will increase its value, but it is unlikely that we will see any increase on the interest rats any soon.
AS i think the FED may not rise interest rate due do high volatiliy in stock market in previous days with slow down in china.
The fed may go to rise rate from december onwards…
Agree with you on this one too! I think there are just too many factors on the table that it’s tough to tell if the knee-jerk reaction will be sustained or if the Fed will balance it out with changes in estimates or their forward guidance. I’m also waiting for the dust to settle then figure out the longer-term dollar trend from there.
Very personal/intimate question:)
When I look into the crystal ball I see Dollar weakness before the strength. So hike or no hike USD(W1)- some corrective weakness and then back to strength. #TradeSafely
Hi,
Well it’s just over 30 minutes to go, and I hope this doesnt sound sad but I’m quite excited to see what happens to the USD currency pairs after the annoucement :18:
This is the first time I have watched news like this come out live (its 6.25pm in the UK here so I’m sat at home drinking a strong coffee) so it is going to be very interesting to see what happens live on my MT4 screen here.
Its been interesting to read what you guys think may happen to the USD should rates rise, but should they stay at 0% will we see different behaviour in the way they react do you think?
