This is one of my favourite strips over the years. And it is still very much relevant. As we look to the new week, it’s all about US data that will drive the mood in broader markets. We’ve already gotten a teaser last week from a couple of smaller releases but this week, we’ll get the big one.
But that isn’t the only item on the agenda in terms of major releases from the US. Tomorrow, we will get the PPI data, then the CPI data and retail sales on Wednesday, followed by the weekly jobless claims on Thursday. That will set up for quite an interesting next few days in markets.
As for today, it should be more of a waiting game once again. So, let’s take stock of the Fed outlook currently.
The odds of a September rate cut are at ~75% with traders pricing in ~41 bps worth of rate cuts for the year. This is the spot to watch closely alongside the bond market reaction, in determining how that reverberates to major currencies and stocks.
The most damning situation I fear that could happen is that we continue to see stickier prices amid a softening in the US economy in general. Those are opposite signals and will present a bit of a conundrum to the Fed, in trying to position for their next narrative. But let’s not get too ahead of ourselves yet. Let’s first see what the data this week will bring to the table.