Fed now has global remit and must consider EM currencies
With the Federal Reserve Rate hike remaining the top agenda this month, Angus Campbell from FX Pro, joined Tip TV to takes a look at the emerging market, noting that the Fed will have to consider the effect of a rate hike on the EM FX.
Overall picture irresponsible for fed to hike rates
The Asian central banks are becoming increasingly dovish and further rate cuts possibility do exits. Australia and Canada see prospects of further easing. The Fed has referred to the global macro scenario previously and the Federal Reserve has to consider the impact of its rate normalization program on the emerging markets, believes Campbell.
The US growth story is looking good with unemployment falling and wages picking up, but the picture has turned more global. Campbell further notes how the resilient Indian Rupee has started to push lower and Fed will have to consider the emerging markets before making its rate move.
Fed will likely move early next year
Campbell believes that the Fed will likely make its rate move early into next year, and it would be surprising to see a rate hike amounting to 0.5%. Mir notes how Fed’s rate signal has previously led to markets crashing lower and USD jumping through the roof.
Interesting FX pairs
Campbell notes that the South African Rand looks like an attractive trade, with ZAR having breached a key psychological level.
The NZD slipped lower after the RBNZ cut rates for the third time this year. With further downside room for rates in New Zealand and Australia, Campbell warns of the FX movements in the Aussie and the Kiwi. He further adds that the China turmoil will add further fuel to the uncertainty in the Asian markets.