US hold interest rates – who will blink first?

By Nick Harrison

Wednesday this week saw the US Federal Reserve keep their interest rate on hold as expected.  Their rate was held at 5.5% but all eyes were on the press conference that followed. At the moment investors are sitting on the edge of their seats waiting to see which one of the central banks are going to crack first and make their first rate cut.  It came as no surprise that the Fed were extremely careful in their wording about what the future looked like for their monetary policy –  “Yes we will cut” they said, but gave no indication of when. The US, Eurozone and UK are all sitting with interest rates that are deemed to be too high at the moment but are, as of yet, holding off to make the first cut.  The likelihood being that the first to cut their rate would see that currency drop in value very quickly.  A lower interest rate equals a lower yield appeal to investors, so they will likely sell off that currency and invest in one with a higher rate. We have therefore seen another tight range in the currency markets at the back end of this week with very little movement around the EUR, USD & GBP.

This morning, the UK has woken up to the local election results with the Conservative party having taken a real beating. While this has not moved the markets so far, political uncertainty as we approach the next general election will, so watch out for Sterling weakness as things develop.

Today at 1.30pm sees the US release their monthly Non-Farm Payrolls data.  The data signifies the change in the number of employed people during the previous month, excluding the farming industry. Job creation is an important leading indicator of consumer spending, which accounts for a majority of overall economic activity, so a lot of attention is given to this figure. We may therefore see a bit of market movement from this later today, so listen out for any calls from our account managers who will share this information with you.

Finally, the Institute Of Supply Management release their Services data in the States at 3pm and this concludes this weeks major economic data.

Next week starts off slowly with bank holiday Monday in the UK, but watch out for potential big market reactions on Thursday and Friday as the Bank Of England announce their interest rate decision on Thursday, ahead of the UK GDP figure being released on Friday. As just mentioned, any rhetoric around the interest rate decision will be heavily scrutinised, so your account manager will have their ears to the ground for you and will communicate any market reactions accordingly.

Market data releases for next week


UK – Bank Of England Interest rate decision     – 12pm

UK – BOE Gov Bailey Speaks                                    – 12.30pm

US – Unemployment Claims                                   – 1.30pm


UK – GDP figure released                                           – 7am

US – Consumer Sentiment                                        – 3pm