Key Events In The Coming “Big Week” For The US

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Markets will again zero in on the U. S. this week, and not just because of Donald Trump in Bloomberg’s opinion. The Federal Reserve meeting and nonfarm payrolls may set a clear direction for dollar and yields for the next few months. U. S. GDP data on Friday showed the largest negative contribution from net exports since 2010. This will give the president ammunition for his Twitter feed because it confirms his view on the evils of globalization. So prepare. Beyond Trump’s rhetoric, it’s going to be a big week for orthodox economic developments in the United States.
No one expects a policy shift at the Fed meeting Wednesday. The FOMC has remained silent on whether they are considering hiking rates in March; the market prices around a one-third chance. This low probability reflects last year’s experience of perpetual rate hike delays. But if the Fed hints that a rate hike is a serious possibility for March, pricing should rise to between 50% and 75%. The dollar would obviously benefit. On the other hand, silence would likely lead yields and the dollar to fall. The dot plot in December showed a median expectation of three rate hikes this year. Nothing has happened since then to suggest this is too optimistic. Therefore, it seems likely the FOMC will acknowledge a March hike is a possibility…so there is also an upside risk for the dollar and yields. However, watch out for Friday’s payroll data as a possible sting in the tail. The Fed won’t have access to the data when they announce policy, and it wouldn’t be the first time the data threw a spanner into the Fed’s intentions.
Other US data in addition to the FOMC and payrolls, include ISM, ADP, housing data, personal income & spending, vehicle sales and core PCE.
That said, in the US, the focus on politics will likely remain paramount, with every Trump tweet closely scrutinized.
In addition to the busy US week, we also have policy decisions from the Bank of Japan and Bank of England, and a slew of important data releases from the Euro area including inflation data which is expected to pop higher, and in the UK parliamentary debate on Article 50 among other data and events.

This post was published at Zero Hedge on Jan 30, 2017.