Thursday, 15 December 2016

GBP/USD falls after Federal Reserve rate hike

The GBP/USD cross has fallen over 1.5 per cent since yesterday evening after the U.S. Federal Reserve announced an increase to its benchmark interest rate of 25 basis points.

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Although the hike was largely priced into the market, it didn't stop the U.S. dollar gaining across the board last night, with the GBP/USD dipping from $1.2725 to $1.2520 this morning.

GBP/USD graph.

The dollar was also helped by comments from Fed Chair Janet Yellen, after she hinted the U.S. central bank could look at multiple rate hikes in 2017.

The announcement that interest rates were likely to rise another three times next year came as welcome news to investors, and immediately saw an increase in flows to the U.S, helping to drive up the value of the dollar.

Yesterday's Fed meeting was their first since Donald Trump won the U.S. presidential election, and with markets anticipating him to boost the U.S. economy by cutting taxes, deregulation and spending the Fed have decided now is the time to take some action.

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