Many market participants skeptical of Fed hike

The signal yesterday's GDP data for Q2 sent out was that US economy is humming. Even though GDP growth corresponded more or less to expectations at 2.3% qoq annualised.

As a result there is not much left of the collapse in Q1. Against the background of the Fed having made it clear again on Wednesday night that a first rate hike very much depended on the data USD was able to benefit only to a small degree and above all not sustainably from the data. 

This morning EUR-USD is trading more or less at the level seen prior to the data publication at 1.0950. 

"There are still too many market participants who do not totally trust the Fed as regards its announcement of higher interest rates. No doubt the FOMC members will take great interest in the University of Michigan's inflation expectations due for publication today. For the 5 to 10 year horizon they had recently stood at 2.7%. As far as this data is concerned the Fed's motto remains unchanged", notes from Commerzbank said.

Most recently market based inflation had eased again. The expectations are of great significance for the Fed as consumer prices are unlikely to rise long term in the absence of inflation expectations.