Japan Services Producer Prices Rise 3.2% in June, Supporting BOJ Rate Hike Expectations 
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The USD was the main victim of the development of market uncertanity appeared in Chinese economy. It is a matter to discuss whether the developments in China really will affect the US economy to the extent the market is assuming. Commerzbank says, the Fed finds itself in a catch 22 situation as it faces the following choice:
- It really does leave its key rate unchanged at the next meeting thus confirming the market that its concerns regarding developments in China are justified. By doing that it also runs the risk of further fueling concerns with this step ("if the Fed postpones the rate hike cycle due to developments in China the situation has to be really bad").
- It plays down the risks in China and hikes its key rate at the next meeting. The problem with that is: first of all it would catch the market completely on the wrong footing, as at pre-sent the market does not expect a rate step in September. On the other hand the market might judge it to be a policy mistake which would fuel economic concerns even further.
