Hot Topic – FED rate hike

September 14, 2016

This week the Market gets jittery over a possible rate hike for September.
Here’s how the markets are responding
• Major global indices are taking a hit following the selloff of US stocks.
• In Asia, the Nikkei fell 1.5%, the Hang Seng dropped 2.5% and the Shanghai SSE is down 1.6%.
• US stocks dropped 2.5% on Friday – the biggest decline we’ve seen since the Brexit referendum.
So what’s got the market shaking like a leaf in Autumn?
• A number of Fed members have signaled that a rate hike is on the cards this year and it could happen this month
• While some members’ comments have been more dovish about a hike in September, overall the probability of a hike has gone up from 18 to 24%
• Most central banks have kept their rates unchanged as they take a wait-and-see approach
• The European Central Bank, and both the Banks of Australia and Canada have been following this strategy
• On Thursday, the Bank of England is announcing the monetary committee’s decision though after August’s rate cuts, it’s expected to follow suit with the other central banks and keep the status quo.
Other data this week to be aware of:
• On Wednesday we have the UK job data report
• As mentioned previously, on Thursday we have the Bank of England rate decision and also the UK retail sales.
• Also on Thursday we have US retail sales and on Friday the US CPI – both of these figures will be closely watched by US dollar traders as they try to predict the Fed’s next stance.

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