According to figures released by the Bureau of Economic Analysis, the United States economy grew at a faster pace than expected. In a report that was published last Friday, quarter on quarter Final GDP, posted an increase of 3.9%, whereas the market had expected 3.7%. The positive data follows the United States, Federal Reserve, chairwoman’s comments that an interest rate increase is still on the table in 2015, with a move to normalize the interest rate environment coming as soon as October.
Prior to these comments and following what was seen as a dovish September FOMC meeting the US dollar had weekend significantly. However, with Janet Yellen, now attempting to reign in some of the overly dovish sentiment, her comments have been made to remind the market that Federal Reserve policy does operate under a “significant lag”. This comment changed the sentiment on the currency markets and has caused the US dollar to appreciate in value.
Today we have no less than three more members of the Federal Reserve, planning to give speeches with Tarullo, Evans and Williams all in attendance at various events. With so much uncertainty at present over the timing of a US interest rate lift-off, it would not be a surprise if a coordinated action now takes place that forces market sentiment to lean to one side of the dovish, hawkish monetary policy debate. It is still hard to see the Federal Reserve taking the decision to increase interest rates in 2015 but if we have a good jobs data on Friday, Hawks might be bold enough to force through a rate increase.