Last week the markets as a whole were volatile. China’s economy continued to post worrying numbers resulting in its biggest slide in the stock markets for six years. Meanwhile much of the focus was on the FOMC meeting and the result statement. With no meeting in Aug. the market was keen to see if the FOMC would hint at a possible rate hike in September. Looking at the language used, the Fed said the economy continued to expand at a “moderate” pace, which is driving “solid job gains and declining unemployment.” This has once again put the focus firmly on upcoming data releases. In addition, healthy Q2 GDP readings were posted by both the UK and US.
Meanwhile, Greece reared its ugly head once again as question marks started to be asked whether or not they could fulfil their obligations in August. The International Monetary Fund (IMF) also made comments that they are very wary of any financial contribution to a third Greek bailout. The problem for the IMF is that their staff believes the elements so far agreed are not enough to make the Greek government's debt sustainable.
The first week of the month is always a busy one with key releases on both sides of the pond which are going to play its part in the interest rate debate from both the UK and US.
Manufacturing data from both the UK and US will be closely monitored today for evidence of continued economic growth. In addition, the PCE price index from the US will be monitored for traces of inflation.
The quietest day of the week in terms of economic data releases. Much of the focus will be on the UK with the Halifax house price index and the PMI construction data.
Today we get an early indication of how the Friday’s US employment report could perform. The ADP employment report is historically short of the Non-Farm Payrolls and as a result less attention is paid to it. In addition the UK PMI Service sector data will be key to Sterling’s performance.
We have a barrage of information released from the Bank of England this Thursday. The BoE’s new and improved policy process is set to coincide with re-emerging fissures in the UK monetary policy debate. Both inflation report and minutes are released, with the latter being the immediate focus as it seems likely to show three members voting in favour of a rate rise. However, we will gain further insight into the inflation report and Carney press conference which follows shortly after.
The all-important non-farm payrolls are released this Friday. A strong US employment report here will be key for a possible September rate hike by the Fed. Two more solid number’s could act as a catalyst for an early rate rise. Non-farm payrolls are expected at 230k and unemployment should hold at 5.3% in July.