Kit Juckes, Research Analyst at Societe Generale, expects the US PMI to post strong numbers which will result in keeping the September rate hike expectations alive.
“The mention in the Fed's Beige Book of some signs of wage growth was enough to give the dollar a bit of a lift heading into the Asian session and ahead of today's non-manufacturing ISM data.”
“The impression is that the Fed remains on track to get the rate cycle underway barring a shock. The big question of course is whether the Chinese-inspired risk sell-off in recent weeks is a big enough shock to justify a delay regardless of the US data in the days ahead.”
“The IMF clearly doesn't think raising rates against the modest global growth backdrop is a good idea. If you think that Chinese over-investment was partly due to coupling themselves to the easy Fed, and that exacerbated the commodity cycle, which eventually swung down, at the same time as China's economy slowed, then the idea that the solution is even easier money looks odd - except to an economic homeopath.”
“SG forecasters expect a rise in the ISM non-manufacturing index to 61.5 in August. That really would keep the possibility of a September rate hike alive. More prosaically, such a strong figure ought to support the dollar and could well trigger further EM and commodity-currency weakness.”