Looking for Fed rate hike could be comingWill a better than expected nonfarm payrolls at the end of last week, and with the recent hike in the Fed discount rate, it looks as though things could be picking up for the economy, and the Fed is preparing to [B]exit from stimulus measures[/B].
As a result, there is a great deal of speculation surrounding when the Fed might begin raising interest rates. GFT’s [B]Kathy Lien[/B] offers insight into this matter in FX360:
According to futures contracts,[B] the market is pricing in a 28 percent chance of a 25bp rate hike in August[/B] and a 42.3 percent chance that the rate hike will come in September. By the end of the year, there is a 68 percent chance that rates will reach 0.75 percent. … [T]here is a very strong chance that interest rates will remain below 1 percent come January 2011. This is good for the U.S. economy because low borrowing costs encourage investment and spending. [B]It will also be good for the dollar[/B] simply because outside of the Reserve Bank of Australia, the Fed is the only central bank that has toyed with interest rates (albeit the deposit rate only) which suggests that they are the closest to raising rates again.
With the Fed expected to raise rates again in the near future, and Europe and Britain expected to remain behind the curve due to their slower recovery and deficit problems, there is a chance that [B]the dollar might retain its relative strength[/B] for a while longer.
[B]See Also[/B]
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[li]Looking for Trends in Forex Trading[/li]Currency trading on the FX market
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