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US Rate Hike Bets May Replace China as Fuel for Market Turmoil

US Rate Hike Bets May Replace China as Fuel for Market Turmoil

Ilya Spivak,

Talking Points:

  • China Fixes Yuan Higher, Calming NFP-Inspired Risk Aversion
  • Fed-Speak, US Data Key as Rate Hike Bets Inform Risk Trends
  • Carney Talk, BOE Meeting to Guide Tightening Timeline View

Risk aversion swept financial markets at the weekly trading open in a move that may have reflected fears of an aggressive Fed rate hike cycle after Friday’s upbeat US jobs data. Negativity eased after China strengthened the Yuan at the daily fix for a second consecutive day.

In the week ahead, a busy Fed-speak calendar as well as retail sales and consumer confidence data will keep the US policy outlook center-stage. Firm data and rhetoric hinting the central bank will look past market turmoil to press on with policy normalization may boost the US Dollar and rekindle risk aversion.

The Bank of England monetary policy announcement and a scheduled speech from Governor Mark Carney will help gauge policymakers' confidence in overcoming imported disinflation to raise rates in 2016. A hawkish tilt represents greater volatility risk versus the alternative, opening the door for a British Pound recovery.

--- Created by Ilya Spivak, Currency Strategist for DailyFX.com

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