To say that markets have been unstable recently would be an understatement. Since the beginning of the year, two major currencies USD and GBP have been rising and falling like the sea during low tide and high tide. USD was up with the President Trump’s promise to reinvest in developing and growing industry and jobs State-side. Then USD dropped when his administration was unable to reverse the previous administration’s health-care plan bringing up the question if he could even act on his promises. GBP went up in April when PM Theresa May called general elections and plummeted when it resulted in a hung parliament.
Markets’ and investors have been put in mentality of conservative apprehension, regarding what is considered two of the Foreign Exchange Markets primary currencies. Now the upcoming FOMC Meeting on 13thВ and 14thВ of this month could scare investors even further away from the “Cable”. Compounding this effect is a slight down-turn in the U.S. economy; slow wages and job creation shows that the 2 percent growth rate is a hard number to reach. Now if the FOMC raises interest rates on Tuesday and Wednesday it will add further fuel to this fire of uncertainty, even possibly sending the message that another hike is to be expected later in the year. An action like this could radiate out effecting more than trader’s psychology; consumer confidence and purchasing power could be significantly wounded, if inflation continues to outpace wages. Further aggravating such a situation would be a loss of corporate confidence due to the interest rate hike, lower consumer confidence and weak purchasing power.
After testimonies, scandals and unfulfilled promises for economic growth – an increase in interest rate might be a significant hit to the USD.