This is one of my favorite strips over the years. It is still of great importance. As we look forward to the new week, it is all about the US data that will move the mood in the broader markets. We already got a teaser last week of a few smaller releases, but this week, we'll get the big one.
But this is not the only item on the agenda regarding major releases from the US. Tomorrow we will release Producer Price Index data, then CPI and Retail Sales data on Wednesday, followed by Weekly Jobless Claims on Thursday. This will set you up for an interesting next few days in the markets.
Today, it will be a waiting game again. So, let's evaluate the Fed's current expectations.
The odds of a September interest rate cut are around 75% with traders pricing in rate cuts of around 41 basis points for the year. This is where the bond market reaction needs to be closely monitored, to determine how this is reflected in major currencies and stocks.
The most dangerous situation I fear will occur is that we continue to see firmer prices amid the overall decline in the US economy. These are opposite signs and will pose some puzzle for the Fed, as it tries to position itself for its next speech. But let's not get ahead of ourselves yet. Let's first see what this week's data will bring to the table.