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GBP & USD – anyone need a rate hike? - Rabobank

FXStreet (Barcelona) - Jane Foley, Senior Currency Strategist at Rabobank notes that as far as the market is concerned it is now a close run thing as to whether it will be the BoE or the Fed who will hike rates first.

Key Quotes

“On the back of disinflationary pressure we have delayed our call regarding the timing of the first BoE rate hike from ‘May at the earliest’ to August 2015.”

“For some time we have maintained that the Fed is unlikely to hike interest rate until the end of 2015."

“Weak energy and food price rise are likely to create further downside pressure on inflation indices. In addition, the stronger tone of the USD during the second half of this year, if maintained, would argue in favour of a delay to a rate hike from the Fed.”

“Fed chair Yellen has previously acknowledged the improvements in the US labour market. However, weak inflation pressures may mean that Yellen maintains a dovish position for a while yet.”

“It is the accommodative policy actions of other developed world central banks that has been fuelling the move back into the USD in recent months. Insofar as this implies a tightening of monetary conditions for the US, it is possible that as some point in the months ahead that the Yellen could push back. This could slow the pace of the USD’s recovery though we continue to look for moves towards EUR/USD1.20 and USD/JPY 120 medium-term.”

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