World Bank Joins Chorus to Dissuade Fed

The chief economist of the World Bank said a Fed hike in September would risk causing panic in emerging markets in the latest warning. That didn't stop a hefty rally in risk appetite as the S&P 500 gained 2.5% and commodity currencies surged. Japanese consumer confidence and Australian home loans are due up next. A new GBPJPY trade with 2 charts has been issued. 4 Premium trades are currently in progress.

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"The world economy is looking so troubled that if the US goes in for a very quick move in the middle of this I feel it is going to affect countries quite badly," World Bank chief economist Kaushik Basu told the FT, saying it could cause some panic and turmoil.

The IMF has also repeatedly warned against rate hikes and on the weekend the G20 communique released on the weekend said central banks should work to minimize negative spillovers, mitigate uncertainty and promote transparency in a clear nod to the Fed.

What could give the Fed false confidence about hiking rates is a continuation of sanguine markets like we saw today. The return of US traders led to an aggressive round of bargain hunting and the second best day of the year for the S&P 500. But as Ashraf wrote, USD/JPY didn't post a convincing signal today. Despite the S&P 500 gain, it also failed to break its recent range.

Beaten down commodity FX could provide some value here but there is a central bank minefield in the days ahead. The Bank of Canada and RBNZ decisions are due in the next 24 hours.

Up first, at 0130 GMT, the RBA releases July home loans data. There are no cracks in the housing market yet and lending is expected up 0.8% after a 4.4% rise in June. Thirty minutes later, the RBA's Lowe delivers a speech. Japan is in focus later with August consumer confidence due at 0500 GMT and machine tool orders an hour later.