It has been a busy month for the United States – and as the furor over the election dies down its impact on the global financial market is still ongoing. With so much still up in the air and investors wary of how the policies of the President-elect will influence the markets, the one event that seems almost assured to happen is a December interest rate hike by the Federal Reserve.

Just last week on the 17th of November the chair of the Fed, Janet Yellen, indicated that it could raise interest rates relatively soon. Although the Fed has been extremely cautious about doing so in the past, the positive jobs data coupled with inflation numbers would seem to justify the move to do so.

Already the foreign exchange market has reacted, with the US Dollar steadily gaining strength ever since the comments were made. However what many traders are wondering is: Will this interest rate hike be the first of many?

Political Pressure

Adding to the speculation is the political pressure that the Fed is increasingly seen to be under. Towards the latter part of his campaign, now President-elect Donald Trump was extremely critical of the Fed’s decisions to keep interest rates low and even went so far as to specifically accuse Janet Yellen of playing politics with the interest rates.

Now that he has won it is widely expected that there will be pressure on the Fed to raise interest rates. So far Janet Yellen has reiterated that she intends to stay on through to the end of her term (i.e. January 2018) and that there is a need to make long-term decisions that may not always be popular.

Right now the stance that the new US administration will take is still a matter of speculation and it is impossible to know what the eventual policies will be. However the presence of political pressure coupled with the current data makes the idea of a series of interest rate hikes not unreasonable – to say the least.

Act to Curtail Inflationary Pressures

One of the key areas that traders are going to be on the lookout for in the coming months are details of the new President’s spending. If he follows through with his campaign promises lower taxes and higher spending on infrastructure are both on the cards – which will increase the inflationary pressure.

Assuming that were to happen, the Fed is likely to feel that it would be very justified in raising interest rates – which will in turn strengthen the US Dollar. Due to the interconnected nature of these movements it is likely that by the time the interest rate hike is announced it would have already been priced-in by expectation.

Impact in the Coming Months

Although there’s still so much that’s up in the air, the most immediate impact in the coming months will be felt sometime in December when the Fed decides whether or not it will increase interest rates. If that hike fails to materialize, some traders may unwind their positions and the US Dollar may fall slightly.

After that it is much more of a case of playing by ear. Depending on when (and if) policy announcements of the new administration roll out and any further indications by Janet Yellen and the Fed as to future interest rate hikes – the markets will react accordingly.

If you’re trading on global markets using a platform such as ETX Capital it is important to remember that the US interest rates aren’t going to be the only factor influencing them. Other events such as the Brexit negotiations (as and when they take place) could very well have an effect too.