Last week we saw sentiment and expectations over a possible 2015 “lift off” in US interest rates change. The FOMC statement was slightly more hawkish than many had expected given the continued downward pressure that we have seen on the global stage. What this has resulted in is a changing of rate expectation for the December meeting. A week ago the market was pricing in a 30% chance, we are now much closer to a 50/50 scenario.
Signs of the continued pressure on global growth saw a string of disappointing numbers from both sides of the pond. In the US, durable good, consumer confidence and GDP all missed there forecasted numbers. Meanwhile, both mortgage approvals and GDP failed to meet expectations in the UK. Finally, just released this morning was yet another poor number from China as once again their manufacturing sector contracted.
To start the week we have the manufacturing numbers from both the UK and US. Both figures are expected to show a slowing in the pace of expansion.
A slightly quieter day with limited economic data. The UK’s construction data will be the key highlight. However, after the European markets close, ECB President Draghi is due to deliver opening remarks at the European Cultural Days 2015 event, in Frankfurt. Given the expectations for ECB policy action in December, the market will wait with baited breath for any clues that Draghi drops in his rhetoric.
Market activity should pick up from this point onwards as the economic calendar becomes packed with tier one data and news. Both ECB President Draghi and Fed Chair Yellen are due to address the market at separate events. Draghi is due to deliver opening remarks at the ECB Forum on Banking Supervision and Yellen is to testify on bank regulation before the House Financial Services Committee, in Washington DC. Both will be scrutinised for clues on future policy. Looking at data, we also have the UK PMI Services which is the dominant sector. From the US, we get an early indication of how Friday’s job numbers could look with the release of the ADP employment report and the ISM non-manufacturing is scheduled for release.
Super Thursday lands on the BoE calendar, which results in the release of the BoE inflation report, the rate decision and BoE minutes. This will be key in deciphering future policy action from the UK. Last week we saw the expectations brought forward from Q4 2016 to Q3 2016 after the FOMC comments. Looking at the data front, German factory orders and US weekly jobless claims are due to hit the wires.
The busy week will conclude with the highly anticipated US jobs data in the form of the Non-Farm Payrolls, unemployment rate and average earnings. This is the first of two readings that the Fed will view before making their decisions on rates in December. We are expecting to see a slightly firmer number than the last two months. Price action is likely to be volatile surrounding this event.