The US Dollar has climbed to a near 18-month high off the back of The Federal Reserve meeting minutes last night, with most Fed members seemingly backing another interest rate hike by the end of this year.
Last month saw the Fed hike rates for the first time in over three years, with the minutes crucially showing pretty much all members had backed that rate hike last month. Fed Chairman Kevin Warsh stated that most members agreed that another rate increase would be appropriate by the end of the year in order to bring inflation closer to the central bank’s target of 2%. Recent economic data has seen the likelihood of a rate increase this month fall to 20.5%, but there is a real possibility now that another rate hike will be implemented this quarter.
Alongside strong Dollar movement, risk sentiment across Europe has come under further pressure as the financial situation in France continues, as borrowing costs in France have reached levels not seen since the early 2000s. French deficit is projected to reach 5.4% of their GDP. On top of this, France are also facing political uncertainty ahead of their elections next summer.
In The UK, British 30-year yields have hit their highest levels since 1998 which have contributed to The Pound coming under pressure this morning against The Euro and Dollar. Yields climbing in general would usually be seen as positive because of the interest to be gained, however with The UK’s economic situation not exactly glowing, markets will be concerned as to how the government plan to service this debt.
Turning our attention to the economic calendar today, the main release of note will be the weekly jobless data out of the U.S. Both continuing claims and new claims are both set to climb again, by 1 million and 3,000 respectively. Usually, we could expect to see some movement on the Dollar off the back of this, but realistically right now the main driving force behind the US Dollar is the focus on when the Federal Reserve implement their next interest rate hike.