Even after tumult in the economy such as the lackluster retail sales figures released yesterday, Federal Reserve Chairwoman Janet Yellen has predicted that 2015 may be an ideal time for an interest rate hike. Even with parallel opinion in the Federal Open Market Committee, it is difficult for her to make forecasts of this magnitude, and so she has tempered her statement with the conditional “…if the economy evolves as expected.” In addition to this, she has also implied that labor conditions and the economy as a whole need improving before seeing a trend of interest rate policy normalization. Her remarks were surely difficult to make, given the weakness present in today’s US economic cycle.
In the big picture for the US, the strong Dollar has driven exports down and reduced competitiveness. This trend may be present in excess of the short-term, and inflation has been in the ditch even on the back of assuring words from the Federal Reserve that the factors responsible are temporary. More indicative of further troubles on the brink are global issues like the Chinese and Greek fiascos, never mind what the major central banking representatives say. The dollar has appreciated against its peer currencies and commodities like gold, also due mostly to the torrid global economic landscape. Attractive trades in this environment are more defined by “the best of the worst”, at least until something shakes the world’s economy out of its slump.
US Interest Rate Hike Probable
Market Trends - 15/07/2015