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All eyes are on interest rates to start the week, in Europe as well as the United States.
Chris Weston, head of research at Australia’s Pepperstone, called Friday’s U.S. payrolls report a “nirvana” of strong job creation and weaker wage growth, and it continues to colour everything.
The dollar remains on top on the view that a probable “skip” by the Fed next week just cements a hike in July, and any thoughts of rate cuts this year are getting cleared from the table.
Asian equities are carrying on the global rally, setting Europe up nicely to do the same.
The Fedspeak that has been such a big driver of markets in recent weeks, will go quiet in the days ahead with officials in a blackout period.
Not so for the ECB, whose chief Christine Lagarde gives introductory remarks today at a hearing before the Committee on Economic and Monetary Affairs.
There’s been a slight pullback in expectations for further tightening after last week’s data showed euro-area CPI cooling more than analysts predicted.
Lagarde said that day that there was still “ground to cover” in the tightening cycle.
The latest comments from an ECB official are more dovish though, with Bank of Italy governor Ignazio Visco saying a decline in energy costs should help cool inflation.
For today, Saudi Arabia is doing its part to keep crude oil away from those late-2021 lows of recent weeks, pledging an additional 1 million barrel-a-day production cut on top of an OPEC+-agreed pledge to restrict output that’s seen Brent back to just below $79.
Elsewhere, Turkey’s lira continued its sharp descent since the re-election of President Tayyip Erodogan, despite the weekend appointment of highly regarded Mehmet Simsek as finance minister, in a signal the country is moving away from unorthodox interest rate cuts in the face of high inflation.
The lira weakened more than 1% to 21.12 per dollar in thin Asian trading, approaching the record low of 21.80 marked last week.
Key developments that could influence markets on Monday:
Germany trade data
Switzerland CPI
Spain, Italy, France, Germany, euro area, UK PMIs
Euro area PPI
US PMIs, factory and durable goods orders
