So the FED raised rates by 0.75bps but what does appear to have changed is that they are watching data for their next reaction and have reduced the “policy” of forward guidance. The view of a further rise in September, by 0.5%, persists but the pullback in the oil price and other commodities have given the market pause for thought and hence the stock and other risk markets have rallied.
The above has created a sentiment change and hence the retreat in the US$ and a rally in the aforementioned risk assets. The market appears to have forgotten, possibly temporarily, any possibility of recession and / or worldwide slowdown; all of which gives July and August data added value as the FED are now making decisions off the back of it and the market needs to know whether its worrying about slowdowns or inflation and the clues lie in the data.
To that point we have a reasonable amount of important data across the globe with non-farm payrolls and unemployment data being the standouts.
Non-Farms are expected to show a slowdown in hiring so the risks are to a higher (good) number putting the risk rally on hold as wage inflation becomes a fear.
The markets are going to “see saw” for the next two months on data and thus perception of inflation and anti-inflation rate rises.
The Bank of England are likely to move a modest 25bps as the UK is already teetering on a recession and it doesn’t want to be seen to be the catalyst for pushing the economy in that direction.
Energy commodities backed off as the consumer demand destruction continues as does the slowdown fears, the converse was true in metals who staged an anaemic rally as the US$ subsided.
ISM Manufacturing PMI
JOLTS Job Opening
UK services PMI
Bank of England Rate decision
Balance of Trade
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