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01/04/2014: Movements in the interest rate expectations giving clues to forex pairs

I have been tracking the Short Term Interest Rates expectations for the US, Eurozone and UK.

In the past couple of weeks there has been a significant shift.You will notice that for both the US and Eurozone the rates have moved in a dovish direction. However the UK rates continue to move in a tightening direction.

This would suggest that the market may have now calmed down following the knee-jerk reaction Janet Yellen’s at apparently hawkish “around six months” comment at the FOMC press conference. It is also reflecting the continued disinflation that the Eurozone is experiencing. However the market clearly believes that the UK continues on its way towards a first tightening, possibly as soon as December.

This helps to explain why Cable has been strong over the past week and why Euro/Sterling has been in decline.

I will continue to watch the STIRs which have been giving us clues over the direction of the key forex pairs.

Short Term Interest Rates   01042014


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At Hantec Markets Ltd we provide an execution only service. Any opinions expressed by analyst Richard Perry should not be construed as investment advice or an investment recommendation. This report does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. Forex and CFDs are leveraged products which can result in losses greater than your initial deposit. Therefore you should only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved, seeking independent advice if necessary prior to entering into such transactions.