Currency Note US Dollar

Federal Reserve still cautious on interest rates

By Ricky Bean September 18th, 2014

The US dollar had a mixed day yesterday, with investors hesitant ahead of the Federal Reserve event in the evening. The US currency weakened somewhat, thanks to worse-than-expected inflation figures from the country. These figures showed an unexpected fall in consumer prices – as such, the hopes of an interest rate rise stateside were calmed. The Federal Reserve had pledged to keep interest rates low for a considerable time, and this data supported this viewpoint. This was further backed up when the US Federal Reserve released their economic projections and funds rate, along with an accompanying statement and press conference later in the day. At this point it became very clear that the Federal Reserve’s decisions were going to be data led, interest rates were not going to be increased any time soon but when they are raised we should expect a fairly constant stream of 0.25% increases so that by the end of 2016 interest rates should be closer to 3% than zero.

Today keeps up the data and outlook activity, starting out with the building permits figure. This is joined by the unemployment claims from the ever-important labour market. This is heavily linked to interest rate decision, and as such will be of importance to investors following last night. Later in the afternoon, US Federal Reserve Chair, Janet Yellen, is due to speak. This may also have the potential to affect US dollar markets. The day closes out with a manufacturing index from the Philadelphia Federal Reserve, with reactions to last night likely to continue to affect markets throughout the day.