A big night for markets with a Fed rate decision and monthly ADP Non-Farm figures the centre of attention.
In the early hours of tomorrow morning, the Fed Reserve will announce its monetary policy decisions for the world’s largest economy. While it is expected that interest rates remain unchanged, the more important thing for markets will be the Bank’s outlook for the year ahead.
It had been widely tipped that the Bank would lift rates in June, mainly due to an improving economy and fiscal stimulus provided by Donald Trump and his policies. But, with Donald Trump seemingly struggling to get his policies through and with a disastrous miss in the official government Non-Farm figures last month, it may be enough to see the Fed Reserve take a more cautious approach to tightening monetary policy. As Non-Farm figures are released this week (ADP tonight and government figures Friday), Janet Yellen & co will likely want to see a turnaround in these figures before contemplating a lift in rates. Another important component that the central bank looks at is the Average Hourly Earnings. This reflects wage inflation. This has been quite weak for a while, so the Fed may want to see an improvement in that figure on Friday before making a decision.
All of these factors combined mean that it might be a “hard sell” to tighten monetary policy.
As far as data releases go, there is still a fair bit set for publication from around the world. This includes: US ADP Non-Farm Employment Change, Final Services PMI, ISM Non-Manufacturing PMI & Crude Oil Inventories, Spanish & German Unemployment Change, Prelim Flash GDP & PPI and finally, Construction PMI from the UK.