What will the Fed do? – DB

By FXStreet FXStreet (Guatemala) – Nick Lawson, Gaël Gunubu, analysts at Deutsche Bank AG explained that disinflation has not yet turned to outright deflation.

Key Quotes:

“A divergent Fed is unlikely to soothe concerns. Will they be model driven, pragmatic or Machiavellian in their deliberations? Labour markets are tight but they are not strong. Unit labour costs are sluggish and new jobs have been concentrated amongst the lower paid. Global growth is teetering and dependant on the cheapness of USD.”

“Perhaps the U.S. feels insulated enough to embark on a tightening that will accelerate EM outflows to the benefit of domestic US assets. Perhaps the strongest case for rate hikes is to break the buyback loop and start to redirect capital towards capex (savings = investment), but they have let risk assets move too far beyond the fundamentals to make that journey anything else but awkward.”
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Source:: FX Street