US Dollar Exchange Rate Falls on Fed Rate Spectulation

October 16, 2015 - Written by John Cameron

STORY LINK US Dollar Exchange Rate Falls on Fed Rate Spectulation

US Interest Rate Hike Speculation Drives US Dollar Exchange Rate Volatility

The primary factor affecting the relative value of almost all of the world’s sixteen most actively traded global currencies at the moment is the forecast timing of the next US interest rate hike. The high-yielding export driven Commodity Dollars (currency : AUD), (currency : NZD) and (currency : CAD), along with the minor Asian currencies, (currency : INR), (currency : SGD), are considered the most exposed to a tightening of policy from the Federal Reserve, but the US Dollar (currency : USD) itself and the euro (currency : EUR) via arbitrage trading, will also be affected in a major way by interest rate ‘lift-off’, (or lack of it), in the States. For this reason, analysts pored over the mixed messages contained in the Federal Reserve’s ‘Beige Book’ which was released on Wednesday evening.

USD to GBP, EUR Conversion Rate Movement Follows US Inflation Data

The publication brings together region by region assessments of the state of the US economy and by and large, it did not make for pleasant reading for Dollar holders. The Beige Book noted overall ‘modest expansion’ of economic activity across the twelve regions of the US, while the picture in the labour market of the world’s premier economy appeared to have deteriorated since the previous edition, with the Fed noting that employment across the States had increased ‘modestly to moderately’.

Wage Growth Weighs on Rate Hike Projections

Meanwhile, wage growth in the US has remained a nagging concern for US rate-setters since the advent of the post-Lehman Brothers economic recovery Stateside; the Fed’s policymakers noted the patchy nature of the increase in living standards for US workers in recent months, observing that although, ‘more significant wage increases were observed, they were largely concentrated among highly skilled workers in information technology, health care professionals, professional services, and some of the skilled trades.’

AUD, NZD, CAD, USD Exchange Rate News and Predictions

All in all, most FX insiders felt that this week’s edition of the Beige Book makes rate ‘lift-off’ in the States a more distant prospect. For this reason, analysts forecast further near-term losses for the Pound Sterling against the Australian Dollar, New Zealand Dollar and Canadian Dollar and gains for the UK unit against the US Dollar.

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