Uncertainty surrounds Fed rate hike

July 29, 2016

The Australian dollar is trading higher today following on from Yesterday’s decision from the US Federal Reserve to keep interest rates on hold.

At 5.15pm (GMT) the Aussie dollar was trading at US75.09c up from US74.88c at close of trade yesterday.

Although the Fed decided to keep rates on hold the tone of the following statement was more upbeat than last time and has led some to believe that a rate hike in December is definitely possible,

"They clearly have set the stage for a potential rate hike in September, but they didn't want to commit themselves," said Kathy Jones, chief fixed income strategist at Charles Schwab.

 "You can tell they're feeling a bit more confident." She added.

With US presidential elections coming up and overall global uncertainty surrounding global financial markets some analysts predict that the Fed may raise rates before the end of the year although they will certainly be cautious,

"The statement has a bit better tone, reflecting significantly better data relative to expectations over the last six weeks," said Joseph LaVorgna, chief U.S. economist at Deutsche Bank.

 "However, the Fed has gotten wise to the fragility of markets. They kept in that they're still monitoring financial conditions, so even though many things broke positively for the Fed since their last meeting, they want to be extra cautious." He added.

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