Greece and the future of the euro after the nation's bailout referendum will still likely be the top-1 headline early in the week but Fed minutes and speeches might contest that dominance.
US Preview: Fed-Speak to Contest Recent Euro-Centrism Washington - The afterglow of the Greek referendum on Sunday is likely to enthrall financial markets at the beginning of the first full week of July, yet several speeches from Federal Reserve officials as well as the minutes from the bank's latest meeting scheduled over the next couple of days could counterbalance the euro-centrism.
Fortuitously after the long Independence Day weekend, there are no major early morning releases on Monday so traders will get a couple of minutes to catch up on the latest headlines before the first data hits the wires.
First up, will be the survey of purchasing managers working in the US services sector conducted by financial services firm Markit.
Even though the so-called PMIs receive a lot of attention overseas, in the US investors tend to put more weight into a similar report from the Institute for Supply Management out just 15 minutes later at 10:00am.
In any case, the services sector – unlike its goods producing sibling – was not as exposed to the harmful effects of lower oil prices (slump in investment into drilling gear, for example) and last year's surge of the dollar (less competitive prices in the international marketplace).
That is a reason why the ISM's non-manufacturing gauge averaged 56.7 points January through May compared to the 52.4 points heaped together by the manufacturing sector over that period - the factory gauge picked up toward the end of the second quarter.
At its most recent reading, the services ISM dipped to 55.7 points and since any reading over 50 signifies industry growth, that was still a robust result, but it was nevertheless the survey's lowest point since April last year. The release accompanying the data shrugged off the fact by claiming the industry chiefs' comments about business condition were "mostly positive" and indicated "economic growth will continue".
That's what Wall Street forecasters are expecting to see – a pickup in the non-manufacturing ISM to 56.4 points when the data drops on Monday.
Jobs aftertaste
Yet, even if that report turns out favorably, the Fed's own index of conditions in the labor market is unlikely to impress. First of all, the June employment report, which provides the most important of the 19 components the indicator is built from, was a lemon – investors were looking for a bigger increase in jobs than the 223,000 but instead they got a net 60,000 in negative revisions. Wages were flat and the jobless rate mostly dropped because people left the labor force.
The bad taste from the June payrolls figures is once again likely to return on Tuesday when the job openings and labor turnover survey from the Department of Labor is released. The so-called JOLTS report, however, lags by a month so it will still reflect slightly more favorable conditions.
Still the broader picture of the US labor market remains positive – companies are hiring enough workers to keep pushing down the unemployment rate so faster wage growth remains only a question when the spare labor resources shrink fall low enough.
Rate outlook
That is a key question that has been bothering the Fed's policymakers who know that they can only achieve both sides of their mandate (maximum employment and stable 2% inflation) once the labor market starts producing higher wages.
The minutes from the June 16/17 meeting released on Wednesday afternoon will therefore be the highlight of the week in terms of US marco-releases.
When the statement unveiling no change in the ultra-ease stance money policies was released last month, markets took it as dovish, that is investors saw the policy committee as less willing to start normalizing interest rates in September, which has been for some time now the base case scenario for the first rate hike.
The so-called dots, which represent individual officials' forecast for interest rates, also encouraged a dovish interpretation, according to some analysts but researchers at Bank of America Merrill Lynch disagree.
"Perhaps the best way to think about the decision is to imagine you are at the FOMC meeting on September 17," they suggested in a note release in the wake of the meeting.
By the Greece will no longer dominate the headlines, we will have had another three months of solid growth data, the first quarter weakness will be forgotten, wages will continue to creep higher and the unemployment rate will creep lower, BofA thinks.
"Currently, the market is pricing in only about a 25% chance of a hike at the September meeting, but with several months of solid data we would expect them to be pricing in a high risk of a hike going into the meeting. The one fly in the ointment is low core inflation and the Fed seems willing to look through that."
That's why some investors might be surprised by a more neutral sound to the minutes than what they deemed was a dovish meeting.
"We do suspect the bar for the first rate hike is not all that high, and the minutes historically have had a tendency to sound more hawkish than the meeting itself (albeit less so recently)," BofA added in a more recent note.
Of course, the minutes are three weeks stale so the discussion over international events and the turmoil surrounding Greece specifically will become larger issues at this month's meeting.
Meanwhile, key Fed policymakers, including Vice-Chair Stanley Fisher, have stuck to the rate-hikes-are-coming-later-this-year rhetoric.
Economists at Deutsche Bank pointed to a recent interview with NY Fed Chief William Dudley, a permanent voting member, who suggested that 2.5% growth in the second quarter and a similar GDP expansion in the next three months would present sufficient progress for a rate hike "certainly by the end of the year."
"In our view, this was an important statement from one of the more consistently dovish members of the FOMC," the Deutsche researchers said.
Fed Chair Janet Yellen is scheduled to speak on Friday and Deutsche expects her to present a similarly upbeat view on the US economy.
Other senior officials from the central bank who will offer their take on the economy will be San Francisco Fed President and close Yellen ally John Williams on Wednesday.
A leading dove, Narayana Kocherlakota from the Minneapolis Fed will take part in a panel discussion in Frankfurt on Thursday. A more hawkish Kansas City Fed Chief Esther George is also scheduled to deliver public remarks on Thursday.
Yellen's Friday speech will be preceded by Boston Fed Chief Eric Rosengren who is also a dovish leaning policymaker.
- See more at: http://wbponline.com/Articles/View/49930/us-preview-fed-speak-to-contest-recent-euro-centrism#sthash.JegHGLgk.dpuf
Greece and the future of the euro after the nation's bailout referendum will still likely be the top-1 headline early in the week but Fed minutes and speeches might contest that dominance. US Preview: Fed-Speak to Contest Recent Euro-Centrism Washington - The afterglow of the Greek referendum on Sunday is likely to enthrall financial markets at the beginning of the first full week of July, yet several speeches from Federal Reserve officials as well as the minutes from the bank's latest meeting scheduled over the next couple of days could counterbalance the euro-centrism.Fortuitously after the long Independence Day weekend, there are no major early morning releases on Monday so traders will get a couple of minutes to catch up on the latest headlines before the first data hits the wires.First up, will be the survey of purchasing managers working in the US services sector conducted by financial services firm Markit.Even though the so-called PMIs receive a lot of attention overseas, in the US investors tend to put more weight into a similar report from the Institute for Supply Management out just 15 minutes later at 10:00am.In any case, the services sector – unlike its goods producing sibling – was not as exposed to the harmful effects of lower oil prices (slump in investment into drilling gear, for example) and last year's surge of the dollar (less competitive prices in the international marketplace).That is a reason why the ISM's non-manufacturing gauge averaged 56.7 points January through May compared to the 52.4 points heaped together by the manufacturing sector over that period - the factory gauge picked up toward the end of the second quarter.At its most recent reading, the services ISM dipped to 55.7 points and since any reading over 50 signifies industry growth, that was still a robust result, but it was nevertheless the survey's lowest point since April last year. The release accompanying the data shrugged off the fact by claiming the industry chiefs' comments about business condition were "mostly positive" and indicated "economic growth will continue".That's what Wall Street forecasters are expecting to see – a pickup in the non-manufacturing ISM to 56.4 points when the data drops on Monday.Jobs aftertasteYet, even if that report turns out favorably, the Fed's own index of conditions in the labor market is unlikely to impress. First of all, the June employment report, which provides the most important of the 19 components the indicator is built from, was a lemon – investors were looking for a bigger increase in jobs than the 223,000 but instead they got a net 60,000 in negative revisions. Wages were flat and the jobless rate mostly dropped because people left the labor force.The bad taste from the June payrolls figures is once again likely to return on Tuesday when the job openings and labor turnover survey from the Department of Labor is released. The so-called JOLTS report, however, lags by a month so it will still reflect slightly more favorable conditions.Still the broader picture of the US labor market remains positive – companies are hiring enough workers to keep pushing down the unemployment rate so faster wage growth remains only a question when the spare labor resources shrink fall low enough.Rate outlookThat is a key question that has been bothering the Fed's policymakers who know that they can only achieve both sides of their mandate (maximum employment and stable 2% inflation) once the labor market starts producing higher wages.The minutes from the June 16/17 meeting released on Wednesday afternoon will therefore be the highlight of the week in terms of US marco-releases.When the statement unveiling no change in the ultra-ease stance money policies was released last month, markets took it as dovish, that is investors saw the policy committee as less willing to start normalizing interest rates in September, which has been for some time now the base case scenario for the first rate hike.The so-called dots, which represent individual officials' forecast for interest rates, also encouraged a dovish interpretation, according to some analysts but researchers at Bank of America Merrill Lynch disagree."บางทีคิดว่า เกี่ยวกับการตัดสินใจที่ดีสุดจะจินตนาการประชุมคาดเฟดในวันที่ 17 กันยายน พวกเขาแนะนำในรุ่นหมายเหตุในการปลุกของการประชุมกรีซจะไม่ครองพาดหัวข่าว เราจะได้มีข้อมูลการเติบโตอีกสามเดือน จะลืมอ่อนแอไตรมาสแรก ค่าจ้างยังคงเลื้อยสูง และอัตราการว่างงานจะคืบต่ำกว่า BofA คิด"ปัจจุบัน กำหนดราคาตลาดในเฉพาะเกี่ยวกับโอกาส 25% ยกขึ้นในการประชุมเดือนกันยายน ได้ ด้วยหลายเดือนข้อมูลทึบ เราหวังให้สามารถกำหนดราคาในความเสี่ยงสูงของการธุดงค์ไปในที่ประชุม การบินหนึ่งในลิปสติกเป็นเฟ้อต่ำ และเฟดดูเหมือนว่ายินดีที่จะมองไปที่"จึงอาจประหลาดใจนักลงทุนบางเสียงที่เป็นกลางมากขึ้นนาทีมากกว่าสิ่งที่พวกเขาถือว่าเป็นการประชุม dovish"เราสงสัยว่า แถบสำหรับเดินทางไกลอัตราแรกไม่ที่สูง และนาทีอดีตมีแนวโน้มที่จะเสียง hawkish มากขึ้นกว่าการประชุม (แม้ว่าน้อยดังนั้นเมื่อเร็ว ๆ นี้), " BofA เพิ่มในหมายเหตุล่าสุดแน่นอน การมีสามสัปดาห์หลังเก่าเพื่อสนทนาผ่านกิจกรรมระดับนานาชาติและความวุ่นวายที่ล้อมรอบประเทศกรีซโดยเฉพาะจะกลายเป็น ปัญหาใหญ่ในการประชุมเดือนนี้ในขณะเดียวกัน คีย์เฟดผู้กำหนดนโยบาย รวมถึงเก้าอี้รอง Stanley Fisher มีติดอยู่ที่สำนวน rate-hikes-are-coming-later-this-yearEconomists at Deutsche Bank pointed to a recent interview with NY Fed Chief William Dudley, a permanent voting member, who suggested that 2.5% growth in the second quarter and a similar GDP expansion in the next three months would present sufficient progress for a rate hike "certainly by the end of the year.""In our view, this was an important statement from one of the more consistently dovish members of the FOMC," the Deutsche researchers said.Fed Chair Janet Yellen is scheduled to speak on Friday and Deutsche expects her to present a similarly upbeat view on the US economy.Other senior officials from the central bank who will offer their take on the economy will be San Francisco Fed President and close Yellen ally John Williams on Wednesday.A leading dove, Narayana Kocherlakota from the Minneapolis Fed will take part in a panel discussion in Frankfurt on Thursday. A more hawkish Kansas City Fed Chief Esther George is also scheduled to deliver public remarks on Thursday.Yellen's Friday speech will be preceded by Boston Fed Chief Eric Rosengren who is also a dovish leaning policymaker.- See more at: http://wbponline.com/Articles/View/49930/us-preview-fed-speak-to-contest-recent-euro-centrism#sthash.JegHGLgk.dpuf
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