BTMU changes its FED's hike forecast

The devaluation of the renminbi has reinforced the US dollar’s broad-based strengthening trend and when combined with ongoing weakness in commodity prices has prompted the US interest rate market to adjust sharply lower.

Still the sharp move lower in US yields appears exaggerated in light of the likely impact on the US economy.The probability of the first Fed rate hike being delivered in September has fallen back towards more like “1 in 3”. However in light of the negative developments overseas even dampened Fed rate hike expectations are doing little to prevent further US dollar strength in the near-term.