In October, China stepped up monetary easing with its sixth interest-rate cut in a year to combat deflationary pressures and a slowing economy, moving ahead of anticipated fresh stimulus by central banks from Europe to Japan and possible tightening in the US.
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A determinant here would be following the lead of the Federal Reserve which should hike in December.
The kiwi didn’t move much after figures showed the government’s operating deficit was smaller than predicted in the first four months of the 2016 financial year, as a number of one-off corporate tax payments swelled the Crown’s coffers. Finally, while “unemployment is low, so is the participation rate”. This has also been confirmed openly by some Fed officials. Investors are betting the rate will stay unchanged through 2016, according to forward contracts based on the sterling overnight index average, or Sonia.
On the contrary – “the world economy is strong enough to withstand tighter United States policy”, said Andrew Kenningham of Capital Economics. US rate hikes have some positive aspects. This lowers a buyer’s purchasing power and can hurt homebuilders’ volumes, revenues and profits. Other officials from the Fed like James Bullard and Dennis Lockhart have also indicated that they were ready to vote for an increase in the interest rate. With more than five years’ experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic research.
Following the release the pound to dollar exchange rate conversion slipped to 1.5154 confirming markets have read today’s event as having done little to close the policy gap between the U.S. and UK. Indeed, the BoE argues not to over-estimate the recent rises in wage growth as inflationary driver; on the contrary, it points towards additional downside risks to the expected moderate recovery of inflation over the coming months, due to renewed lower oil prices.
Slightly higher rates notwithstanding, an improving economy, job and wage growth, moderating home price gains, rising rentals, rapidly rising household formation and a limited supply of inventory should keep the housing market momentum alive in 2016.
The global market is focusing on the pace of future USA rate hikes. They mean that the US economy is rebounding, which is a boon for Korean exporters. The longest-serving current member is Martin Weale, who joined in August 2010, more than a year after the last change in rates. Keep in mind that 30-year bonds are considered the “safest” bonds.
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The probability the Fed raises rates from near zero on December 16 rose to 90 percent from 70 percent in the latest Reuters poll of over 90 economists, taken December 4-9.
