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Rate Hike: Fed hike trajectory important; Carney message is

Jane Foley, Senior FX Strategist for Rabobank, joined Zak Mir, technical analyst for ShareProphets.com, and Mike Ingram, Strategist for BGC Partners, to discuss an array of topics including the presumed Fed rate hike this evening, as well as focus on the Euro and Yen, plus a view on Carney and the UK economy.


Fed trajectory the important outcome today

Foley believed that a Federal Reserve rate hike is a done deal as markets are concerned, and the real focus needs to be on the plan for future hikes in 2016. The September dot plan indicated 4 more hikes in 2016, however, Foley commented that 2 rate rises are more likely with inflation at low levels. She continued that there is room for Yellen to be over hawkish on market expectations, despite the ECB failing to reach their market expectation which saw the EUR/USD rise as a result. Foley added that the markets are spooked by the fact that the US could be affected so much by global events like China, and thus the market needs Yellen to affirm the US economy rather than discussing global weaknesses.

Euro a play on risk appetite; Yen always a safe haven

Foley outlined that as global stocks moved higher recently, the Euro went down. She continued that the Eurozone has a large current account surplus, and you aren’t getting any return on the Euro, so savers in Europe look for higher yield assets elsewhere, but this carry trade only works with heightened risk. Foley also dwelled on the slightly better picture coming from the Eurozone, with CPI numbers up this morning. When concerning USD/JPY, she noted that the Yen is always a safe haven, and Foley also commented on the correlation between EUR/USD and USD/JPY over the summer.

No rush for a hike in the UK

Foley moved on to Carney, where she believed his message to be that the next move in the UK will be an interest rate hike, however, there is no need to rush into any sort of monetary tightening. She expressed that inflation is still quite low, and wage growth came out a little softer this morning, and unemployment figures plateauing after dropping for the last few years, all points to holding off a rate hike in the UK.

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