Christmas is here

21 December, 2015

Tom Arnold

For the last few weeks, and in fact months, the currency markets have been dominated by the will they, won’t they speculation as to whether the Federal Reserve in the US were going to raise interest rates in the wake of a sustained period of positive US economic data. Last Wednesday was the FED’s December policy announcement and the markets were confident that this was the month they were going to make their move… The day came, and the markets waited with bated breath to see if the decision would cause an explosion of movement – would the Dollar take advantage of all of the yield seeking investors and get a surge of strength? Would the Euro crumble as the currency see-saw took its toll? Would the Pound be able to make some gains while focus was elsewhere?

The decision did come and for the first time since 2006 the Federal Reserve did indeed raise interest rates. And as a result… Nothing much happened. The Dollar did gain a bit of strength and the Euro did weaken a bit, but not by a great deal – certainly not the multi-cent moves that many analysts had mooted. The reason – the markets were so convinced that the decision was coming, that most of the moves had been slowly happening over the last few weeks and months – or “pricing in” as it is called. So in reality the only big moves would have come if the raise in interest rates hadn’t come, i.e. if the pricing in had unravelled.

So with that major hurdle now out of the way the markets are fairly settled and now, like the rest of us, are waiting for the Turkey to be served on Friday. There is some data of significance out this week before the big day though, and we could see some movement, possibly exacerbated by the thin trading that always occurs at this time of year. So if you do have a currency requirement in the next few days or at the start of the new year, then it is still well worth staying in touch with your Currency Index  account manager to be kept informed of exactly what is happening and what your options are.

German PPI
European Consumer Confidence Survey

UK Consumer Confidence
UK Public Sector Net Borrowing
US House Price Index

UK House Price Survey
UK Current Account
US Durable Goods Orders
Canadian GDP

UK Mortgage Approvals
US Jobless Claims