US GDP heightens rate hike prospect

Joshua Mahony MSTA Scope Markets

The FTSE looks likely to end the day in the green, after yet another choppy day.

Volatile day sees late FTSE rally
US GDP comes at a convenient time for Hilary Clinton
GDP reading shifts Fed expectations

Yet another day of high volatility for the FTSE has seen the UK benchmark flicker between positive and negative on a number of occasions. This reflects the impact of a melting pot of data and markets, with crude and sterling seemingly unable to find direction, while US GDP and Eurozone economic sentiment data provided a welcome boost to their respective area's economic hopes.

The US GDP reading always promised to be the main event of the day and it certainly did not disappoint, rising sharply to 2.9%. Amid speculation that Barack Obama would heat up the economy to boil at just the right time, it is certainly a bit of a coincidence that US GDP has hit the best level in two years less than two weeks before the US election. Much of this surprise comes thanks to the rise in inventories and exports, which are two of the more volatile elements of the measure.

With today's GDP reading comes a significant jump in Fed rate expectations. Markets now place the chance of a December US rate hike at around 75%, with the one major hurdle coming in the form of next month's election. With markets increasingly expecting a Clinton victory, today's data should provide enough impetus to force the Fed's hand.

Author

Joshua Mahony MSTA

Scope Markets

Joshua Mahony is Chief Markets Analyst at Scope Markets. Joshua has a particular focus on macro-economics and technical analysis, built up over his 11 years of experience as a market analyst across three brokers.

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