Interesting Data for the Fed This Week
The foundation keeping the Fed on an aggressive rate hiking footing has been the US economic data. Although it has been mixed over the last few weeks there have not been any major red flags that would have obviously got the Fed’s attention. So, the US data this week is going to be important to see if the Fed will continue to affirm a 4.6% terminal rate as outlined by Jerome Powell at the last FOMC meeting.
Economic data this week
The US services PMIs are up on Wednesday. The market is expecting a fall down to 56 from 56.9 prior. The low forecast is 54, so a print below 54 will be more negative for the Fed. The US ADP jobs data is released on the same day with 205K expected up from the prior of 132K. A miss on both the headline for jobs ADP (below minimum expectations of 200k) and Services PMI on Wednesday will be negative for the USD, but positive for stocks if traders perceive this to make the Fed more cautious about an aggressive path for rates.
On Friday the US Non-Farm Payrolls will be the most significant US economic data point. The headline is expected to be 250K down from the 315K prior. The unemployment rate is expected to stay constant at 3.7%. So, if we see a miss on the headline below 200K (minimum expectations) and higher unemployment figures above 3.8% (maximum expectations) then markets will start to price in a Fed slowing on rates which should be USD negative and stock positive.
The Fed has told us that it will be data-dependent going forward, so paying attention to the data gives the market clues for the Fed’s next move and where we may see a bounce in stocks.
About: HYCM is the global brand name of HYCM Capital Markets (UK) Limited, HYCM (Europe) Ltd, HYCM Capital Markets (DIFC) Ltd and HYCM Limited, all individual entities under HYCM Capital Markets Group, a global corporation operating in Asia, Europe, and the Middle East.
High-Risk Investment Warning: Contracts for Difference (‘CFDs’) are complex financial products that are traded on margin. Trading CFDs carries a high degree of risk. It is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved. Seek independent expert advice if necessary and speculate only with funds that you can afford to lose. Please think carefully whether such trading suits you, taking into consideration all the relevant circumstances as well as your personal resources. We do not recommend clients posting their entire account balance to meet margin requirements. Clients can minimise their level of exposure by requesting a change in leverage limit. For more information please refer to HYCM’s Risk Disclosure.
*Any opinions made in this material are personal to the author and do not reflect the opinions of HYCM. This material is considered a marketing communication and should not be construed as containing investment advice or an investment recommendation, or an offer of or solicitation for any transactions in financial instruments. Past performance is not a guarantee of or prediction of future performance. HYCM does not take into account your personal investment objectives or financial situation. HYCM makes no representation and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast, or other information supplied by an employee of HYCM, a third party, or otherwise. Without the approval of HYCM, reproduction or redistribution of this information isn’t permitted.