Will Federal Reserve Pre-Announce Interest Rate Hike? US Dollar USD Gains Forecast vs Pound Sterling

October 26, 2015 - Written by James Fuller

STORY LINK Will Federal Reserve Pre-Announce Interest Rate Hike? US Dollar USD Gains Forecast vs Pound Sterling

Pound Sterling (GBP) Exchange Rate Forecast to Fluctuate This Week

This week’s session in the global currency markets is forecast to bring considerable market movement for the Pound Sterling (currency : GBP) against the other majors.

Federal Reserve Rate Hike to Dominate Focus, Will US Dollar Gain?

Investors will have to wait until Wednesday evening, when the US Federal Reserve makes its penultimate monetary policy announcement of the year, for the main risk event of note.

The interest rate decision from the world’s premier central bank is likely to yield yet another ‘no change’ announcement, with US rates being maintained at their current record low banding of 0.0 – 0.25%; anything other than this would represent a massive surprise for investors, causing major ructions for many global currencies.

However, futures markets are still pricing in a live chance that the Fed will be hiking its key lending rate before 2015 is out and the US policymakers’ habit of pre-announcing significant moves means that the statement released alongside Wednesday’s decision will be closely pored over by analysts for clues.

Although any central banker would roundly refute such an allegation, many investors suspect that the world’s major reserve banks collude regarding the timing of major policy alterations.

Last Thursday’s assertion from European Central Bank President Mario Draghi that his board of ratesetters would be reviewing their ongoing €65bn per calendar month in December, in combination with Friday afternoon’s announcement of another interest rate cut from the People’s Bank of China (PBoC), have stoked market rumours regarding the potential content of Wednesday’s Fed statement.

Federal Reserve Predicted to Hike Rates in December 2015 as Other Major Central Banks Loosen Policy

The prospect of looser monetary policy from the world’s second and third largest central banks last week has, in the eyes of many analysts, heightened the chances that the world’s premier central bank will drop heavy hints regarding a December rate hike this week.

Such an outcome would see the Pound Sterling US Dollar exchange rate GBP USD plunge, while Sterling would spike against the high-yielding Commodity Dollars; strong gains are forecast for GBP AUD, GBP NZD and GBP CAD if the Fed pre-announces a December rate hike.

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TAGS: American Dollar Forecasts Pound Dollar Forecasts