FXStreet (Bali) – The ANZ Research Team notes that the market remains divided on a possible Fed rate hikes in September, with arguments both in favour and against the start of tightening.
Key Quotes
“Punters remain divided on whether the Federal Reserve will commence interest rate normalisation this month or hold off until the global situation becomes clearer.”
“On the one hand, the labour market has strengthened significantly, and inflation, by some measures, is rising. Years of super-low interest rates are distorting economic decisionmaking and increasing structural risks.”
“On the other hand, global financial sentiment is fragile and commodity prices are weak. In addition, measures to head off yuan depreciation pressures are putting upward pressure on US bond yields as China reduces its FX reserves (though the likely extent and impact of this is the subject of vigorous debate).”
“The USD is strong and is causing pain. One could make the counterintuitive case that when markets are nervous about growth is the perfect time to hike, as this will cap long-end yields, but the risk of causing a global financial accident must be weighing heavily on policymakers’ minds.”
(Market News Provided by FXstreet)