Here's How New Rate Hike Predictions Are Affecting The Market

This week, the rhetoric from the U.S. Federal Reserve suggested that the bank may hold off on a rate hike in September. Most analysts had been betting that the bank would raise rates in the coming month, but minutes from the Fed's July meeting released on Wednesday showed that the central bankers are concerned about how commodity prices will weigh on inflation.

The bank has set a 2 percent target for inflation, and most believe that coming close to that figure is still a long way off in the future.

Currency Implications

When investors revised their rate hike bets to later in the year, they also moved away from the dollar. The greenback has been on the rise recently as investors were expecting to see it continue to appreciate with a rate increase on the horizon.

Now, with data from CME Group showing that just 24 percent of investors see the bank raising rates in September, traders are abandoning long-dollar positions.

Related Link: Fed Rate Hike Expectations: What Four Big Banks Are Saying

Markets Shaken

With a September rate hike looking unlikely, some were expecting to see a lift in U.S. equity markets. However, share markets moved in the other direction this week, as investors took the Fed's caution to signal bumps ahead. As the Fed's decision to put off a rate increase in September would largely be due to uncertainty in the global market, investors are hesitant to pour cash into risky assets like stocks.

Image Credit: Public Domain
Posted In: Long IdeasNewsTop StoriesFederal ReserveMarketsTrading IdeasCME GroupRate Hikeusd
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