Originally published by Rivkin Securities
US markets closed slightly lower on Monday although still very close to record highs. The ongoing battle between the president and the FBI has not dented market confidence. The six-weekly meeting of the Federal Open Market Committee occurs this week with market pricing now implying a 100% chance of a 0.25% rate hike. With this month’s hike considered to be a certainty, the market is now focussing on when the next hike will occur. Current pricing suggests a 43% chance that another hike occurs before the end of the year. Despite the progress so far in renormalising interest rates, the 1% rate expected after this week’s meeting is still extremely low by historical standards and represents the low point of rates from the previous rate cycle under Alan Greenspan in the early 2000’s. There is still, therefore, much progress to be made in returning rates to a neutral level.
The coming week is busy for economic news with the main event being the US rate decision to be released early Thursday morning AEST. Also on Thursday we get Australian employment data for the month of May. With large headline increases in job creation for the prior two months, the forecast for this month is a more modest 9,700 increase in jobs. The unemployment rate is due to remain steady at 5.7%. Later this week the US will release CPI and retail sales data which will both factor into the FOMC’s decision making for the path of interest rates. As in Australia, US retail sales have been relatively weak recently with many retailers struggling to stay afloat. The May data, to be released Wednesday, is only expected to show a 0.1% increase in retail sales although after food and energy are excluded that number is expected to be 0.2%.
UK investors have shrugged off the unexpected result from the election with the FTSE 100 falling just 0.2% on Monday.
Data releases:
· Great Britain CPI (YoY May) 06:30pm AEST
. US PPI (MoM May) 10:30pm AEST