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December US Rate Hike back on table, please read terms and conditions.

December US Rate Hike back on table, please read terms and conditions.

An interest rate hike in the States could well be back on the cards following the Federal Open Market Committee (FOMC) statement last night. Despite keeping rates on hold for now, the statement outlined that the FED expect the economy to continue to grow at a moderate pace, while global problems are not so much an issue.

The statement mentioned it would be “appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labour market and is reasonably confident that inflation will move back to the 2% target in the medium term.” Such rhetoric has lead the markets to anticipate that a  possible lift off is back on the cards for December, data depending. As a consequence, GBPUSD fell overnight and similar gains for the Greenback were seen against the Euro, with the pair dipping back below 1.10.

Momentum of the Dollar could well be halted as soon as today, however, as third quarter GDP figures are released later. Forecasts estimate a growth percentage of 1.6%, down from 3.9% in the prior quarter. A better than expected reading could see a further strengthening in the  Dollar, but anything less could surrender the gains achieved last night.

In Europe today, the German CPI data and labour data, and the EC confidence indicators are released. A softer than expected CPI would highlight the policy divergence between the European Central Bank and the Fed, and weigh on the Euro.

With no UK economic data on the calendar yesterday, Sterling trading was at the mercy of the global market repositioning ahead of the Fed policy decision yesterday evening. Cable hovered directionless in a tight range slightly below the 1.5300 mark. The pair jumped higher ahead of the FOMC decision, but dropped back to the mid 1.5250 area, where it currently resides on global post-Fed USD strength. UK house prices have increased, and September money supply and lending data is expected to come in as expected. All of which means Sterling will be susceptible to pro-USD sentiment.

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