The turn of June and July can be a hot period for financial markets due to the number of macroeconomic data released, including from the US labor market.
The Federal Reserve has a dual mandate, which means that it looks not only at inflation, which has risen sharply recently, but most importantly it looks at the state of the labor market. The Fed will feel comfortable making its decisions once the economy reaches full employment. Hence, Friday's statistics (NFP) could be key in estimating the timing of the next interest rate hike.
Eric Rosengren of the Fed in his recent statements said that if the labor market situation improves rapidly, there are chances even for a hike as early as late 2022. So what does the market now expect ahead of this week's US publications?
The US employment report is likely to show an increase of 675k jobs in June, following an increase of 559k in May (lower than expected). Wider business openings continue to boost economic activity and labor demand. On the other hand, the unemployment rate is expected to fall from 5.8 percent to 5.7 percent, but this is still very high compared to 3.5 percent before the outbreak. The ISM Manufacturing PMI, on the other hand, should show a strong pace of expansion in factories despite ongoing supply constraints. Other important releases include foreign trade data, construction spending, ADP employment change, home sales, Case-Shiller home prices, Chicago PMI, Dallas Fed manufacturing index and the final Markit Manufacturing PMI reading.
In Europe, on the other hand, the focus will be on preliminary inflation rates for the Eurozone, Germany, Italy, Spain and Switzerland, as well as unemployment data for the Eurozone, Germany and France. In June, consumer price inflation in the 19-country currency bloc is likely to moderate, returning to the ECB's target of just under 2 percent. Investors will also keep an eye on Eurozone business survey results, German retail sales and import prices, Spanish and Italian PMIs, consumer confidence, and household consumption in France.
For steadily rising oil prices, Thursday could be key as investors will be keeping an eye on the OPEC+ meeting where major oil producers are likely to increase joint production by around 500,000 barrels per day due to favorable crude price behavior and estimates of increased demand in July and August.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
77.46% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.