Hike or no Hike

18 Mar 2015

Markets are getting restless ahead of the US FOMC meeting minutes due Wednesday with the USD taking a break from its recent surge upwards. The Dollar Basket is up 10% this year as US investors speculate on a possible June rate rise. Meanwhile UK chancellor George Osborne, eager to impress ahead of May’s general election, presents his budget to the House of Commons.

The UK is likely looking to the US for a lead on interest rate rises. However, this is at odds with much of the rest of the world as the Eurozone and key Asian economies apply QE to stimulate growth. There is concern that the US economy isn’t quite ready for a hike – the resultant dollar strength, already priced into the market, is hitting American businesses who export goods abroad. Wage gains are faint at best and that 2% inflation target remains somewhat elusive.