Good morning
Fridays nonfarm headline number didn’t make great reading, coming in some 20k less than expected and downward revisions to the previous couple of months of some 86k. However the unemployment rate held at 4.2% and average hourly earnings actually picked up to 3.8% which doesn’t really help the market, or indeed the Fed, decide whether a 25bps or 50bps cut this month is warranted. General feeling is that a 25bps cut will be seen, but there are those looking for 50bps, focussing on Powell’s insistence that employment is now the main area of attention.
The other, perhaps more interesting question, is how much will the Fed cut this year. Some are seeing 1.25% of cuts, implying one 25bps and two 50bps cuts. Others are looking for some 50bps less, just 25bps cuts at each of the next three meetings this year, although do also see more cuts in early 2025. We are now in the Fed blackout period so don’t expect any clues from Fed officials this week. The latest US CPI readings out this week will be keenly watched to see whether inflation is under some control.
In terms of price movement, USD weakened initially, GBPUSD bounced to 1.3240 and EURUSD to 1.1155 following the announcement, clearly looking at the headline and downward revisions rather than the details. Since then we have seen USD push higher and this morning GBPUS is back at 1.3100 and EURUSD at 1.1060.
I mentioned US CPI due out this week. We will also have the latest ECB rate meeting where they are expected to resume rate cuts after leaving them unchanged over the past couple of meetings. Currently 4.25%, it is widely expected they will cut 25bps to 4%.
In terms of domestic data, UK unemployment is out early tomorrow morning and industrial production Wednesday morning. BoE rate meeting is next week but so far the focus is well and truly on the Fed. US CPI Wednesday and PPI Thursday are going to be watched closely.
Elsewhere, England managed to win on Saturday against Republic of Ireland, Englands two goals coming from players who could have played for Ireland had they chosen differently. We play again on Tuesday, this time against Finland. Saturdays display was functional rather than outstanding, I expect more of the same this week. Premier League action resumes next weekend, its Spurs v Arsenal on Sunday. Can’t say I’m looking forward to that.
Englands cricket team will be hoping to avoid defeat by Sri Lanka today after a poor second innings left Sri Lanka needing just 219 runs to win. They are currently 94/1, it will take something of a miracle for England to take the remaining nine wickets for less than 125 runs.
I hope you dodged some of the rain at the weekend. It may be drier this week but it’ll be chilly. I know I’ve been away on a couple of holidays this year but it really doesn’t feel as though we had much of a summer here at home.
- 01.30 AUS Westpac consumer confidence
- 04.00 China trade balance
- 07.00 UK unemployment
- 07.00 German HICP
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