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Fed still optimistic about US economy

An interest rate increase in December is in sight as the Federal Reserve acknowledges US economy is strong despite recent jitters in financial markets.

Hype around imminent Fed rate cut cools down

The US Federal Reserve has left interest rates unchanged at 2.25 per cent.

The Federal Open Market Committee (FOMC) remained optimistic about the US economy, suggesting it will go ahead with a rate rise in December. Two more hikes are expected in 2019.

The Dollar strengthened against the Pound and the Euro as investors focused on the divergence of interest rate policy between the US and other major economies. With the European Central Bank (ECB) and Bank of England (BoE) being slow to increase rates, which could drag on next year, the Fed will continue with its plans.

Today’s focus is on the UK Gross Domestic Product (GDP) release at 9:30 (GMT). Analysts have forecast an increase from 0.4 per cent to 0.6 per cent over the past quarter. If figures miss this estimate, the Pound will end the week on the back foot.

Sterling has already slipped from its weekly highs as optimism over an imminent Brexit deal has gradually subsided. The Financial Times has reported UK Prime Minister Theresa May will try to persuade ministers to back her Brexit deal this weekend. But she may end up asking for more time to reach an agreement, which will send the Pound down.

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