With the U.S markets closed today, the economic calendar is on the lighter side ahead of what is certainly going to be an interesting 2nd half of the week.
Macroeconomic data out of the Eurozone this morning was limited to Spain’s unemployment numbers, which continued to improve, while falling short of forecasts, providing the EUR with little upside as the Dollar continues to hold its ground ahead of this week’s Dollar intensive schedule, which includes the FOMC meeting minutes, service sector PMI numbers, nonfarm payrolls and the ever more important wage growth figures on Friday.
Following last week’s Dollar sell-off, the markets have calmed with trading volumes on the lighter side today, expectations being that the FED will have discussed the balance sheet and the timing of when to begin selling down assets. Much of the sentiment of FOMC members has already been shared through speeches in recent weeks however, so focus will be more on the stats and how the economy looks to be progressing into the 3rd quarter.
At the time of the report, the Dollar Spot Index was up 0.07% at 96.285, the Dollar recovering from an intraday low 96.045 going into the European session. Upside will likely be limited however, when considering what looms for the markets later in the week.
While the Dollar has managed to make a dent into last week’s losses, the pound has stood its ground going into the European session, with the weaker June construction PMI figures doing little damage, as the markets look ahead to tomorrow’s more important service sector PMI figure, which will need to be positive for the market to continue pricing in a more hawkish BoE and an imminent shift in monetary policy.
BoE Governor Carney has certainly set out his stall, shifting from his dovish position, leaving the next MPC decision in the hands of the data.
It’s all down to the central banks for now, with Asian and European equity markets seeing red following recent gains, the markets taking a pause ahead of the plethora of stats later in the week.
With so much focus having been on the FED, it will be the turn of the ECB to take the limelight on Thursday, with the monetary policy meeting minutes scheduled for release. From the previous monetary policy statement, the minutes are likely to be more hawkish and aligned with Draghi’s new found vim, with Wednesday’s service sector PMI’s and Friday’s industrial production figures out of Germany the only other possible drivers.
Volatility is picking up and central banks are driving it and we can expect more through the summer as both central banks and the markets gauge whether the recent uptick in economic growth has any legs in it or is likely to begin running out of steam.