Canada fared especially badly. The unemployment rate has fallen to 5.1 percent, and price inflation remains low because of depressed energy prices.
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The futures market implied traders see only a 7 percent chance of a rate hike on Wednesday and a 34 percent probability of a rate increase at its next meeting in December, according to the CME FedWatch program.
“The price action underscores that the divergence theme that is central to our bullish US dollar scenario is not only driven by the timing of the Fed’s lift-off but by what other central banks are doing and going to do”, wrote Marc Chandler, global head of currency strategy at Brown Brothers Harriman.
Adding to the risk-off mood, the U.S. Navy sent a destroyer within 12 nautical miles of artificial islands built by China in the South China Sea, in a challenge to Beijing’s territorial claims there.
Mr Halmarick said osome parts of the U.S. economy were booming on his latest visit, although not the energy cities such as Dallas.
The benchmark 10-year U.S. Treasury note yield rose almost 6 basis points on Friday to a 2-week high as demand for safe havens waned, providing broad support for the dollar, whose index hit 97.201, the strongest since August 12. While many central bankers have given up on providing any sort of direction to markets – witness the confusion over just about every utterance from U.S. Federal Reserve Chair Janet Yellen – many might find that refreshing. She added: “Given the significant economic and financial interconnections between the US and the rest of the world, the situation overseas bears close watching”. One reason, of course, is that despite all the Fed’s attempts to raise interest rates, they’ve not been able to do so. New economic data between now and December would have to be bad enough to deter the Fed, they say – and even the recent sharp deceleration in job growth doesn’t meet that bar. Driving the greenback higher at this stage is not good for anyone. The Australian and New Zealand dollars have benefited from the improved investor appetite, each gaining about half a percent on the day against their US counterpart at $0.7261 and $0.6790, respectively.
Pro: This is the easiest option because it costs nothing, and it was also the last tool the Fed used to squeeze extra stimulus out of its current zero-rate policy.
The federal funds rate is one of the most influential interest rates in the US economy, and, for those in Australia, is akin to the RBA’s cash rate.
European Central Bank policymakers held a very “rich discussion” regarding the various monetary policy tools, which included interest rate cuts, Draghi said.
So what does all this mean for your money?
The conventional wisdom is that the gold price is bound to fall sharply as well when United States interest rates are hiked. Watch out for more volatility ahead.
Housing.Interest rates will remain low for a few time to come in both the US and Canada.
In reality, labor markets are not so tight and there is just no sign of higher inflation in the near-term.
Fixed income securities.Yields on GICs and bonds will stay at near record lows.
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In a recent much-discussed speech, Fed board member Lael Brainard put the deflationary pressures emanating from emerging markets at the centre of a forceful case against a “premature” tightening in policy.
