Uncertainty prevails in the foreign exchange market due to pending U.S rate hike

The year 2017 has been very much problematic for the professional traders in the global market. Lots of issues have over clouded the market, which has made it extremely hard to measure the right direction of the financial instrument. The U.S election held on November 8 was the first starting of this financial crisis as Mr. Trump became the newly elected president of the United States of America. During his victory speech, he declared that they would increase the fiscal spending and include tax policy to bring stability in their state. But almost a year has passed and the U.S government has taken no such action. Most importantly Mr. Trump administration is totally unclear and his recent step to close Obama’s healthcare has also created an extreme level of negative U.S consumer sentiment. Most of the leading investors are now thinking that the dollar will have a tough in the near future, as the current interest of the U.S government is not patronizing its citizens. Prior to the closing of the year 2016, the FED officials hiked their interest rate on the basis of 25 points and proposed three projected rate hikes for the year 2017. Due to this proposed rate hike, the dollar bulls are still holding their glory despite such economic and political crisis in the U.S.

Projected three rate hike

The U.S government is facing some extreme level of challenge in the recent days due to the two rate hike in the year 2017.The last six-month performance of the U.S economy was not up to the market and the leading economists think the immature rate hike by the FED officials will have a long lasting adverse effect on their economy. The average hourly income of the U.S citizen went down despite the fact they have added more jobs to their economy. According to some high profile FED officials, including FED chairperson Janet Yellen, there might be no more rate hike for the year 2017 provided that they are not showing any significant progress in their economy. The U.S dollar index has been trading lower for the last six month and such a sharp drawdown has pushed most of its major rivals higher in the global market. The third pending rate hike decision by the FED is going to play a major role in the future strength of the green bucks and any immature decision will push the dollar index to a record low.

Currency market instability

Trading the forex market is very much popular among the retail traders due to its extreme level profitability and clarity. But in recent days the leading investors and hedge firms in the world are now doubtful about investing their money. Due to the extreme level of political instability, the traders are overclouded with lots of rumors and the market is also exhibiting a random change in their trend. Despite all the chaos, most of the major rivals in the global market traded significantly higher for the last six months. The Pound Sterling suffered extensive loss after the Brexit event but the recent weakness of the U.S dollar helped the sterling to recover a significant portion their loss. Currently, the GBPUSD pair is trading above the 1.3000 market, which is a clear sign of stable recovery of the Britain economy. On the contrary, the EURUSD pair has also established a medium term bullish trend in the daily chart despite the crisis of the EURO zone. Currently, the EURUSD pair has secured a record high of 1.15840, a level not seen since May 2016. Though most of the major rivals of the green bucks are currently trading higher, the optimistic dollar bulls are hopeful that they will see a strong turn-around with the implementation of the third rate hike. But before that, the U.S economy needs to do well in most of its sectors.

Commodity market overview

The price of gold is significantly trading higher after it hit the critical support level at 1120.93. Since the price of gold is measured in U.S dollars, change in the U.S rate hike significantly affect the gold investors as it becomes more expensive to buy gold at higher interest rate. However, the recent upbeat data of 1.25M of U.S home sales is suggesting that the U.S economy is slowly turning around and this might trigger the third rate hike decision of the FED. In the month of July, the U.S government has managed to create more job sectors but the average hourly income of its citizens went down. The price of oil is also surging higher due to OPEC extension of oil cap production, and it has pushed the USDCAD pair to its three month low. All the professional traders are currently waiting on the sideline for the next FOMC meeting, in order to get a clear clue regarding the third rate hike by FED.

Summary:

The global investors are facing an extreme level of uncertainty due to political instability. Despite such chaotic movement in the market, most of the leading investors made a decent profit by selling the green bucks. However, things are turning out positive for the mighty green bucks in a slow manner, which might help the dollar bulls to retain their former glory. If we see a significant improvement in most of the major economic sectors in the near future, the FED will most likely hike their interest rate for the third time, which in turn will boost the U.S dollar index, pushing most of its major rivals significantly lower.