Greek deal turns Fed focus back to domestic data

The long-held view has been that the Fed would deliver the first Fed funds rate hike in September this year. This view is based on expectation that US GDP growth should be in the 2.5-3.0% range in the current and coming quarters driven by solid private consumption, continued improvement in the housing markets, a pickup in wage growth and continued solid employment gains.

"The main risk to the call for a September rate hike has been so-called international developments, in particular risks to US growth and financial conditions stemming from Greece and China. With the agreement between Greece and its creditors on Monday morning, these risks have diminished significantly", says Danske bank. 

The other source of risk, China, has also become less imminent after the stabilisation in Chinese equity markets and we remain fundamentally positive on economic growth in China this year.

With risks from Greece and China diminishing, the Fed's focus is likely to return to domestic developments and this will ultimately decide the timing and pace of rate hikes.