Market players are still optimistic on the prospect of Fed rate hike in September, but there are some issues that may be more important to note.

In the post-FOMC meeting announcement yesterday, it was reported that Federal Reserve didn't hike rates and didn't give out any signals on when they will start tightening. However, market players that since the beginning didn't expect many changes are still optimistic on the prospect of Fed rate hike in September. In the circumstances, there are several other issues that traders ought to note because they can easily affect highly traded asset prices although Greenback's appreciation is increasingly stronger.

Dolar

 

1. BOE Is Also Expected To Hike Rates

In the past week, although Cable is under pressures due to the Euro rally, but reports from BoE MPC are increasingly hawkish and UK main fundamental indicators are still considered solid.

The latest MPC minutes published on July 22nd revealed that all of the nine members unanimously agreed to keep rates on 0.5% because of uncertainties around Greece. If risks related to Grexit is non-existent, according to reports, then there may be initial sightings toward rate hike. According to economists surveyed by Reuters, Three of the MPC's nine members might vote for a rate hike in August, getting the ball rolling for a majority to back an increase later this year or in early 2016.

Keeping in mind that Grexit risks has significantly decreased, the possibility for BoE rate hike has also risen. Moreover, Governor Mark Carney mentioned in one of his speech that they can lift rates around the end of the year. As the currency with tighter monetary outlook, many speculators will pick sterling in conjunction with its rate hike prospect versus economic performance comparison. The thing is, in 2015 BoE has failed to deliver rate hike due to unsatisfactory economic conditions.  

 

2. China Stock Market Mayhem Continues

China stock market stormed by high volatility in the last few weeks. After crashed in the beginning of July, China has launched various measures to protect the market, but main indices are still jumping ups-and-downs sharply. Further, the mayhem has dragged other stock markets in the region and harm comdoll fundamentals.

According to analyst from Credit Suisse, as quoted by Business Insider, the stock market crash is becoming an issue for the country's growth, and as a result, its ability to service its debt in the future. China GDP growth in the first half of 2015 was mainly driven by fantastic growth in the financial sector, and growth in the sector is highly supported by its stock markets. Credit Suisse noted that Even if the market can stabilise after the crash, the turnover growth will likely slow down sharply, and from a high base, the financial sector GDP growth momentum could reduce significantly, particularly from 4Q15 onwards.

Although Renminbi is not commonly traded in the forex market, but the impact of China market mayhem may extend, mainly if you trade gold, oil, and comdoll. As an economic giant, China is the main consumer for many commodities, including gold and oil. If the country's economic slowdown get increasingly chronic, then demands on the commodities will drop and may result in cheaper prices, which will be bad for producers.

Last week, report from Commodity Futures Trading Commission (CFTC) covering data up to July 21 showed the Australian dollar net short bets continued to deteriorate and widened by $0.5bn to $3.0bn as investors cut gross longs and increased gross shorts. It closely related to China equities instability because people are concerned if slowdown will affect Australia's main exports too. It also needs to be noted that some Fed members may object rate hike as long as China risks remain close to crisis. 

 

3. Gold And Crude Tumbles

Mass suspension in China equities has triggered gold selloff in Asian market in the following days. It is subsequently projected that gold demands in the country will go down. On the other hand, as expectations toward Fed rate hike grows, Gold became increasingly unattractive as non-yielding asset. It can be seen from lower demands for gold both in physical and futures.

Considering the fact that instabilities may continue and Fed may actually lift rates, there are high opportunity to profit from selling gold. Even so, its status as safe haven means that there will be chances when unexpected events turn things around. Say, Fed failed to lift rates in September, then gold price may skyrocket along with comdoll.

Meanwhile, WTI has dropped significantly, as much as 5.1% in the beginning of this week. The fall of crude to new lows triggered concerns whether countries on the brink of deflation will be slip down the cliff again. For Eurozone and Japan, lower oil prices might mean longer period of loose monetary policy. This is why Euro and Yen has the highest share of short net last week.