Fed challenged by international developments and not yet decisive data

Developments in Greece and China further complicate the Fed's decision-making process. Although contagion has remained muted so far, 'international developments' imply greater uncertainty for the global backdrop. This comes at a time of incoming US data (construction, car sales, manufacturing confidence) that is generally solid, but may not yet have provided the 'decisive' evidence the FOMC is looking for. 

This week's payroll data was a case in point: although payroll growth remained respectable and could be viewed as having returned to a more sustainable path, it was slightly weaker than expected, including on wage growth. 

Indeed, various communications from FOMC members since the June meeting suggest some confusion within the committee itself as to how to interpret the various incoming data. 

"In our view, this means the Fed's decision-making process will be strongly influenced by incoming data, providing limited guidance regarding the timing of the first hike",says Barclays.