Published at 01:47 (GMT) 11 Jul
FT: US Fed is exploring an overhaul of the Federal funds rate – a benchmark that underlies almost every financial transaction in the world – as it prepares for an eventual rise in interest rates.
The Fed funds rate is the main measure of overnight US interest rates and is based on the actual rates reported by brokers for overnight loans between US banks. Fed could redefine its main target rate so that it takes into account a wider range of loans between banks, making it more stable and reliable.
Concerns have grown about the reliability of the Fed funds rate since the Fed began buying trillions of dollars of assets during three rounds of QE.
On FX, good to watch the above, given that Fed is getting ready for rate hike in 2015. After end of QE3 on Oct 28-29 as it tapers off the last $15bln. ($10bln on July 29-30, $10bln on Sept 16-17) from current $35bln.
Could see USD demand as debate, preparation for eventual Fed Funds hike gather pace into 2014 end, after QE3. GBP/USD at 1.7120-23, offers at 1.7150-60, focus still the 6-year highs of 1.7180. BoE unchanged on Thursday - though focus is on whether BoE will hike rate first before Fed or vice versa, in 2015. Bids at 1.7080-00.
EUR/USD at 1.3595-00, concerns over Portugal bank weighing on EUR now, offers 1.3630-50. Bids at 1.3580-90, while ECB remains dovish, with room for more easing. Stops below 1.3570. WL
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