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Outlook – July/August 2014
The biggest news out of the US economy in June had to do with the timeline of the US Federal Reserve’s current QE programme. After an earlier teaser statement from central bank Chair Janet Yellen in June, suggesting confidence in the US economy, Federal Reserve meeting minutes reported a clear timeline for the completion of QE, with the final $15bn to be reduced at the central bank’s October meeting. However, they failed to outline a clear indication as to when interest rates may start to rise, preventing the US dollar to extend these gains.
Caution Ahead
Despite an improvement in the US labour market – unemployment levels are one of the central bank’s indicators for its QE programme – low growth data and disappointing retail sales figures still threaten the strength of the economy.
At the time of writing (15th July), mid-market rates were at $1/0.5833 and $1/€0.7355
US – Forecast
At this stage, we do not expect an imminent interest rate hike in the US and would not expect this to occur before a similar move in the UK. However, given the lack of a clear path forwards at the moment, upcoming economic data could influence the course of action on both sides of the Atlantic.
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