The importance of today’s Fed rate hike – FX Industry View

Today marks a very important day in the fiscal calendar, and one of great significance for traders of all denominations including those in the retail segment, those at the interbank epicenter in London’s square mile, and the professional trading desks of Chicago and New York. Today is the day when Janet Yellen makes her decision on […]

Today marks a very important day in the fiscal calendar, and one of great significance for traders of all denominations including those in the retail segment, those at the interbank epicenter in London’s square mile, and the professional trading desks of Chicago and New York.

Today is the day when Janet Yellen makes her decision on US interest rates, and will announce her plans to an audience which is waiting with great anticipation.

swissquote 7
Ryan Nettles of Swissquote gives his perspective to FinanceFeeds

The announcement during which the Federal Open Markets Committee (FOMC) will release its statement, will take place at 14.00 EST (New York) which is 19.00 in London.

It has been generally considered by many market analysts in the advent of today’s forthcoming announcement that Ms. Yellen will indeed increase the interest rates once again, following a rate hike that already took place in September.

Who cares about interest rate changes? – Actually, pretty much everybody

A usually far from interesting subject, interest rate changes have become a moot point among traders. So important are US interest rates with regard to criteria that is used by large companies to measure market confidence that the September rate hike was actually part of the reason why less large companies looked to issue IPOs in oder to become publicly listed during 2015.

unnamed (2)
FXPRIMUS COO Stephen Leahy with Andrew Saks-McLeod in Boston, Massachusetts. Fed hike likely today?

FinanceFeeds today spoke to Stephen Leahy, Chief Operating Officer at FXPRIMUS, who explained “It is well-known that this US Federal Reserve FOMC statement today is highly likely to raise rates, and the focus will be on the wording of the accompanying statement as to the potential course of action of any future rate hikes” said Mr. Leahy.

“For those who want great analysis of the situation, please see this research piece from Marshall Gittler yesterday” advised Mr. Leahy.

“What will be interesting to me is the amount of market volatility in the immediate aftermath of the decision and statement. We expect lower liquidity in exotic currency pairs towards end of year” – Stephen Leahy, COO, FXPRIMUS.

“But we have been seeing massive inter-day moves in the major pairs lately. That means a combo of thin liquidity and/or huge year-end positioning by the largest of trading houses. With the retail FX industry so dependent on volatility, I am looking to see how volatile this event is as foreshadowing of the last few weeks of the year” concluded Mr. Leahy.

Ryan Nettles, Director at Swissquote explained to FinanceFeeds “The USD crosses are currently trading in a tight range ahead of the FOMC rate decision today.  With the USD weakening about 4% after the ECB interest rate news two weeks ago, we are expecting a rate increase by the FOMC which should reverse the some of the weakness the USD had earlier.”

 

When the Federal Reserve released its third quarter GDP figures which recorded a rise of only 1.5%, Michael Hewson, Chief Market Strategist at CMC Markets said “I think the statement by the Federal Reserve was more about messaging than anything else. I think they wanted to keep the option of a December rate rise on the table even though the data currently suggests that they may not do anything.”

^C2B04CD5FDF441AA25C442353EF8E177B475FCD6398D68AAEE^pimgpsh_fullsize_distr
Image courtesy of Bloomberg

With regard to the October statement by the Federal Reserve, Mr. Hewson noted that the Federal Reserve implemented a timing cycle that would make it difficult for them to raise rates in December when that meeting comes around because there has been a significant sell off in the Euro and a tightening or raising in bond yields.”

Indeed, with this measured view at the beginning of the last quarter, the jury is most certainly still out.

Jansen Khoo, Head of Risk and Prime Services at Blackwell Global told FinanceFeeds today “Our desk view is that the rate hike tonight is certain and priced in. However, what will drive the dollar after the release would be the pace that Fed will hike in 2016.”

Let’s see what the multi-asset proponents make of this should the hike have significant effect on the currency markets as this comes at a time when a great many retail FX firms are rallying to go multi-asset, yet have not yet got the ability to price underlying assets or gain clearing facilities for CFDs or other futures contracts which do not involve FX and can be traded electronically via a retail platform.

Interesting times ahead….

 

 

Read this next

Retail FX

Banxso announces 8.7% interest rate on deposits in South Africa

“With Banxso, they can enjoy the benefits of both worlds – earning competitive interest and having the freedom to trade, all within the same platform.”

Industry News

FINRA to publish transaction details in U.S. Treasury securities

“Consistent with our longstanding practice, FINRA is introducing greater transparency in a calibrated and careful manner, benefiting liquidity and resilience in this critical market while also mitigating potential information leakage concerns.”

Institutional FX

OpenYield launches “cheap and easy” fixed income trading for brokers

“We’re on a mission to make bonds cheap and easy to trade, and are excited about the opportunity to build generational capital markets infrastructure.”

Digital Assets

Sumsub and Mercuryo publish a guide for VASPs: “Mastering Travel Rule Compliance”

“At Sumsub, we’ve concentrated our efforts on filling the gap in understanding the complexity of Travel Rule regulation and helping organizations find the best solution to stay safe and compliant while minimizing costs and avoiding potential risks of non-compliance. This guide we created with Mercuryo, our trusted partner, is the ultimate navigation tool all VASPs can consult.”

Digital Assets

Bitget Wallet Leads with Record Swap Volume & New Crypto Innovations

This week, Bitget Wallet achieved a milestone by surpassing Metamask with a record 388,757 Swap order transactions, securing the global lead. The significant 7-day trading volume, almost 68,000 more than its rival, underscores its liquidity and user trust. This robust activity signals Bitget Wallet’s prominent role and reliability in the dynamic crypto market.

Digital Assets

Embarking on a Digital Currency Journey

Imagine you’ve stumbled upon a treasure map, leading you to untold riches hidden in the vastness of the internet. Instead of gold coins and jewel-encrusted goblets, this treasure comes in the form of digital currencies, the modern-day loot coveted by many.

Reviews

Traders Union Experts Share The Trading Analyst Review For 2024

Navigating options trading in rapidly shifting markets poses a considerable challenge. This is where options trading alert services become invaluable. They aid traders in keeping abreast of evolving opportunities and market trends. In this assessment, Traders Union experts scrutinize The Trading Analyst alert service to ascertain its efficacy. 

Digital Assets

BlockDAG’s Presale Achieves $9.9M: Aiming For A 5000-Fold ROI As Cardano’s Price Rises And Fantom Launches Sonic

Explore Cardano’s surge, Sonic’s efficiency, and why BlockDAG’s growth makes it the top crypto choice. A deep dive into the future of blockchain investments.

Digital Assets

US, UK probe $20 billion Tether transfers tied to Russian exchange.

U.S. and UK authorities are investigating the movement of $20 billion in the USD-pegged stablecoin tether (USDT) through Moscow-based exchange Garantex.

<