Federal Reserve raise interest rates

27 September, 2018

Rob Bastin

Wednesday’s trading was another session absent of any data releases, and in this calm, the pound was relatively stable finishing the day much where it started. Sterling finds itself in an uncertain period with some traders still looking to price the uncertainty and negative impacts of a potential ‘no deal’ in the coming months, whereas other traders seem to be taking brief optimism from all the renewed talk of a people’s votes in the last few days, as British politics continue to dominate market headlines.

Most of the markets yesterday were sat on their hands awaiting the main announcement of the day, the latest Federal Reserve interest rate decision. Everyone was fully expecting another 0.25% rate hike to take the base rate up to 2.25% with its fourth hike in the last 10 months. Usually, a rate hike would strengthen the currency in question, however, such has been the expectation of this hike, any strength was already priced into the markets leaving it down to the accompanying forward guidance for any reason for movement. The Fed did indeed deliver on its anticipated hike and much as with previous hikes, the US Dollar failed to gain any real ground with little change to the forward guidance on future rate changes.

Elsewhere overnight the RBNZ also held an interest rate decision with rates remaining at the current 1.75% as expected. The accompanying rhetoric was quite the opposite to the Fed with a pledge for lower interest rate for longer, keeping the short-term pressure on the Kiwi.

The day ahead sees the return of some eco-stats to digest, namely Euro-zone sentiment figures at 10 am, and more significantly US Gross Domestic Product revisions at 1:30 pm. There are also central bank speeches from ECB’s Mario Draghi at 2:30 pm and the UK’s Mark Carney at 3:00 pm.