Market participants should keep in mind that weak growth in China might affect monetary policy not only in the US, but also in Europe. The euro is currently benefiting from bad news from China (such as this morning's renewed stock market slide), at least versus the USD and the CHF.
"And if the ECB is forced to expand its QE programme in order to boost growth in the euro area, the consequences for the euro will be much more significant than those of an adjustment of the pace of the rate-hike cycle in the US for the US dollar", says Commerzbank.
After all, the markets have priced in only a few rate steps by the Fed so far. In contrast, the FX markets do not expect another loosening of the monetary reins in Europe.
