100% Chance of Raising Rates – Why We’re Skeptical

23.11.2016 • Central Banks

From Kris Sayce – Port Phillip Insider (Australia) –

On the day that Donald Trump became president-elect, the Aussie dollar surged to 78 US cents. Today, it’s trading at just over 74 US cents.

As the prospects of the US Federal Reserve raising interest rates next month have grown, so, too, has the strength of the US dollar.

In fact, based on the futures markets, there is now a 100% probability of the Fed raising rates.

Of course, up until the results starting coming in, many thought that Hillary Clinton was close to a 100% probability of winning the race to the White House.

Even after the polls closed in the UK, the markets had factored in a 100% chance of Britain staying in the European Union — that was why the pound sterling spiked after early exit polls…and then slumped as the votes were counted.

Now, we’re not saying that the Fed’s decision will necessarily be the next ‘Black Swan’ event to hit the market. As we’ve noted before, ‘Black Swan’ events are unpredictable, so, by their nature, you can’t predict them.

Even so, when the futures market has factored in a 100% chance of something happening, it’s still worth considering the possibility of the opposite taking place.

Read more at www.portphillippublishing.com.au

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