We asked traders whether the Fed will raise rates this September
Will the Fed raise interest rates?
Lukman Otunuga @Lukman_FXTM
Sentiment toward the U.S. economy received a welcome boost last week following the hawkish comments from Fed chairwoman Janet Yellen, which heightened expectations over the Federal Reserve raising U.S. rates in 2016. Market participants were handed the clarity long sought when Yellen stated that the case for raising U.S. rates had strengthened in recent months consequently inspiring the dollar bulls. Although speculations continue to mount over the Fed breaking the tradition of central bank caution, there could still be some factors which can force the Fed to remain on standby. Even though domestic data from the U.S. continues to display signs of economic stability, the lingering fears of low inflation could force the central bank to re-evaluate its hawkish stance. There have been ongoing talks of there being a “live” meeting to raise U.S. rates in September, but it may be too early with the possibility that the Fed will wait for further positive data to justify raising U.S. rates in December. Investors may direct their attention towards Friday’s nonfarm payrolls report which, if exceeds expectations, could provide another compelling reason for a December hike. Overall, the outlook for the U.S. economy looks somewhat encouraging and this dispelled period of uncertainty could entice bulls to send the dollar higher.
Lukman Otunuga is an FXTM research analyst.