The US dollar rose against most of its rivals yesterday, as the dollar index continued to rise for an eighth straight day before settling at 94 levels ahead of the Fed's announcement this evening, which is expected to raise interest rates for the third time this year.
Given the market's willingness to make this decision and pricing it for a 98% rate hike, markets will look to the Fed's rates’ future path. Any changes in interest rate or economic growth will have an impact on USD movements, or any signals of raising rates in first quarter of the new year.
Today's meeting will be the last of Janet Yellen, whose term expires in February 2018, to be followed by Jerome Powell, a member of the Federal Reserve, whose view will have an impact during today's meeting. On the other hand, reaching an agreement on the draft tax law is imminent as the December 22 deadline approaches.
The pound rose this morning in the wake of employment data, which showed higher wages in the three months til October, while employment levels fell in a sign of caution to employers in light of the approach of Brexit.
Wages excluding bonuses, rose by 2.3% on a yearly basis - better than the expected 2.2%, and the same as the previous reading, but still below the inflation rate of 3.1% in November, its highest level since 2012.
Unemployment rose to 4.3% against expectations of 4.2% but remained at its lowest level in more than 40 years.
The Bank of England is due to meet tomorrow and interest rates are expected to remain unchanged at 0.50%, and investors will be watching any signals from the bank on a new interest rate hike. Investors will also be watching developments on Brexit negotiations in light of the weekend EU summit.
