The market is as wound-up as a Chihuahua on espresso, trying to glimpse when the Fed will finally raise benchmark interest rates from near-zero. Stocks, bonds, oil, the dollar–all gyrate on the latest rumors.
That said, what’s ahead, and how will it affect the Fed?
While the Fed has said that the Greek debt crisis would not figure into their rate hike plans, the health of the Eurozone (and the euro currency) will necessarily be a consideration.
There’s good news on that front, as Bloomberg notes that Friday’s GDP reports for the EU are expected to show that Europe’s four largest economies are all growing. Germany, France, Italy, and Spain are all expected to post positive numbers. In fact, Greece and possibly Finland (alas, poor Nokia) may be the only Eurozone members to show a negative GDP. This growth is being fueled by a weak euro and weaker oil prices.
Economic numbers out of China, the world’s leading consumer of raw commodities and the world’s second-largest economy continue to disappoint. However, the government has committed to a string of stimulus measures, and has embarked on QE, Asian-Style. This is buoying markets, and may give the Fed confidence to raise rates.
After less than convincing wage date from last Friday’s nonfarm payrolls report, market eyes will be fixated on the Job Openings and Labor Turnover Survey (JOLTS) on Wednesday. Are American workers feeling confident enough to quit their jobs in search of a better paying one? That would be a big boost to the odds of a September rate hike.
First-time jobless claims for last week are released on Thursday. This is another mover-of-markets, at least in the short term. Fewer firings equal a better employment picture.
Even more than wage growth (or rather, the lack thereof), inflation projections are the fly in the Fed’s ointment when it comes to a September rate hike. Friday gives us wholesale prices for the U.S. Inflation is being pressured by the strong dollar, which has helped push commodity and energy prices lower.