Fed rate hike on hold, observing global outlook

28 January, AtoZForex.com, Lagos – Yesterday was a rates decision day as both the US Federal Reserve (Fed) and the Reserve Bank of New Zealand (RBNZ). As widely expected both held rates unchanged, as the RBNZ and the Fed rate hike on hold. Today, we have key reports from the UK and the US.

Fed rate hike on hold

As expected, Federal Reserve officials opted to leave interest rates unchanged at <0.50%, reiterating that they still expect to raise borrowing costs at a “gradual” pace while watching to see how the global economy and markets impact the U.S. outlook. The Fed statement said,  “closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook.” Notably, the Fed excluded a line which was included in December which stated that the risks to the outlook were “balanced.”

The renewed frenzy in global financial markets and a less than encouraging outlook for global growth have led investors to expect a slower Fed rate hike. The dollar did not have a strong reaction to the policy statement, as the greenback remains mixed against its major counterparts.

RBNZ holds rate

The RBNZ opted to hold rates at 2.5% as generally expected, as policy makers insisted that monetary policy will need to stay loose as inflation takes longer to pick up. However, governor Graeme Wheeler, left the door open for possible further cuts to come as the oil glut continues to weight on fuel prices, with inflation still looking set to remain outside the bank’s target for longer than expected. The kiwi dipped after the report. The country’s trade balance figures came at a deficit of 53m, an improvement from a 130m deficit experienced last month.

Oil price rebounds

Brent prices are currently trading around $33 per barrel, after rebounding from a twelve year low, with WTI also trading higher. Crude oil inventories report released yesterday showed an increase of 8.4 million barrels from the previous week as the oil glut continues.

UK Prelim GDP q/q (9:30 P.M GMT)

The change in the inflation-adjusted value of all goods and services produced by the UK economy is forecast to be 0.5%. Although this news is not a strong driver of the pound, we expect it to have a reasonable effect as markets await a catalyst to push the pound into a clearer direction.

US core durable goods orders

This measures change in the total value of new purchase orders placed with manufacturers for durable goods, excluding transportation items, and is forecast to come at -0.1%. While the unemployment claims is expected to show 283k individuals filed for unemployment insurance for the first time during the past week. The dollar remains indecisive.

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