Other positive data from the United States
A number of indicators are suggesting that U.S. consumers have done their duty for the third quarter of the year. In July, Personal Consumption Expenditures increased 0.3%, bringing the annualized average of the past three months to an impressive growth pace of 4.3%. Considering the importance of consumption in the U.S. economy, this is exactly the type of data that feed speculation regarding potential monetary tightening by the Federal Reserve. The implicit probabilities of a key rate hike at upcoming Fed meetings are as follows:
- September 21, 2016: 36.0%
- November 2, 2016: 40.1%
- December 14, 2016: 61.4%
This represents quite a contrast with the anticipations the morning after the U.K. vote in favour of Brexit, when the likelihood of a September or November 2016 rate increase fell to 0%!
Given this context, many analysts have begun to show a positive bias in favour of the U.S. dollar for the remainder of the year. This is a good time to review your hedging strategy.
