The endless hope for a Fed hike

The much-awaited September 17 FOMC meeting is finally here. Market consensus (although extremely divided) expects the Fed to hike its reference rate by 25bp according to a Bloomberg survey, while Fed Funds future price almost a one-third probability of a hike. 

"Although there is economic activity in the US as solid and justifying modest rate hikes, the Federal Reserve is unlikely to begin a hiking cycle in this environment of high volatility and uncertainty in global financial markets. A mild correction is expected in the USD during next week, but continue to have a bullish view in the medium term", says Barclays. 

Data-wise, retail sales, inflation and manufacturing production are the main takeaways for next week.

"USD outperformance is expected in the months ahead as doubts about the health of the Chinese economy and the implications of a weaker CNY continue to weigh, particularly in EM currencies. On the other hand, further EUR weakness is possible in the months to come due to expectation of further easing from the ECB", added Barclays.