- Fed speakers are likely to take focus in the US this week as market participants attempt to forecast the likelihood of a December FOMC rate lift off
- Eurozone GDP release is the most notable Eurozone data of the week, with a possible downbeat reading increasing the possibility of further easing by the ECB
Amid a fairly light calendar in terms of US data this week, focus will instead fall on the number of Fed speakers scheduled to make comments throughout the week in the wake of last week’s stellar nonfarm payroll report. As a reminder, last week’s employment report saw the highest headline figure of the year so far (271K vs. Exp. 185K, Prev. 142K, Rev. 137K) as well as above expectation average hourly earnings (M/M 0.40% vs. Exp. 0.20%). While previous months earlier in the year also saw an impressive headline figure, wage growth has often been highlighted as one aspect of the US economy which has not been growing at a rate that is deemed impressive by the Fed. The interpretation by many of the impressive nonfarm payroll report is that a December FOMC rate lift off is now firmly back on the table, with expectations previously having been pushed back well into 2016. As such, participants will be looking for any clues from the FOMC as to the likelihood of a move by the Fed in December, with the likes of Yellen, Fischer and Dudley all scheduled to speak. Of note, Yellen’s most recent comments were interpreted as hawkish by market participants, where she noted in her testimony to congress that the FOMC thinks that it may be appropriate to move in December, while Dudley came out shortly after to say he `completely agrees` with this comment. As such, participants will be keen to gauge from further comments whether last week’s data heightened the possibility of a rate hike.
Across the Atlantic, data may be more likely to take the spotlight with GDP set to be released out of the Eurozone and the latest employment data set to be released in the UK. Analysts at Nordea suggest that the flash estimate of Q3 Eurozone GDP is likely to show a slowdown in growth compared to Q2 and note that there are significant implications of the release, with downside risks an important factor for the ECB when contemplating whether or not to provide further stimulus either in the form of additional quantitative easing or through a lowering of the deposit rate. Meanwhile, the latest dovish BoE rate decision, meetings and QIR pushed back expectations for the central bank to lift rates, while the downbeat comments regarding inflation and growth weighed on sentiment on the UK economy, as such the latest employment data may be of particular interest in regards to whether the downbeat view is reflected in the data.