OPINION
Market Rating Before FOMC MeetingJan 31
NFP Data Will Guide FED’s Monetary Tightening Rate
International markets are waiting for today’s labor force statistics to be released.
The market anticipates a 300 thousand increase in agricultural employment (NFP) in the Bureau of Labor Statistics (BoLS) report for August, which is released by the U.S. Department of Labor.
In the shadow of the recession discussions regarding the world's largest economy, the markets take into account that NFP data will determine the size of the US Federal Reserve's (FED) interest rate hike at its September meeting.
The U.S. economy is in a recession, shrinking by 0.6 quarter-on-quarter after a negative % 1.6 gross domestic product (GDP) in the first quarter. However, high-frequency data indicate that economic activity is alive.
The PMI data, which serves as a preliminary indicator of the performance of the nation's manufacturing activities, was published by London-based global information provider IHS Markit and S&P Global on the day we left. It was 51.5 points. In this period, the positive divergence in the face of weak PMIs from Europe and the UK, especially China, which is the largest trading partner of the USA, signals that a technical recession can be avoided in the 3rd quarter.
The cost of the Fed bringing inflation down to its target path may now be lessened if data show that the labor market is tight and economic activity is strong. For the headline consumer price index (CPI), which dropped from 9.1 percent to 8.5 percent in July, leaving behind the peak of 41 years, the FED must maintain its monetary tightening rate in a meaningful way. At this point, it could ease the recession pressure on the Federal Open Market Committee (FOMC).
Market forecasts are for NFP to increase by 300,000 in August. If the data to be released today meets or exceeds the forecasts, it may anchor the Fed's rate hike expectations for its September 21 meeting to 75 basis points. This could significantly increase the dollar's pressure on international assets. On the other hand, the NFP, which was at the level of 528 thousand in the previous month, showed an increase of less than 300 thousand in August, which may create a prediction that the Bank will downgrade in interest rate hikes by filing the soft-landing scenarios.
The market anticipates a 300 thousand increase in agricultural employment (NFP) in the Bureau of Labor Statistics (BoLS) report for August, which is released by the U.S. Department of Labor.
In the shadow of the recession discussions regarding the world's largest economy, the markets take into account that NFP data will determine the size of the US Federal Reserve's (FED) interest rate hike at its September meeting.
The U.S. economy is in a recession, shrinking by 0.6 quarter-on-quarter after a negative % 1.6 gross domestic product (GDP) in the first quarter. However, high-frequency data indicate that economic activity is alive.
The PMI data, which serves as a preliminary indicator of the performance of the nation's manufacturing activities, was published by London-based global information provider IHS Markit and S&P Global on the day we left. It was 51.5 points. In this period, the positive divergence in the face of weak PMIs from Europe and the UK, especially China, which is the largest trading partner of the USA, signals that a technical recession can be avoided in the 3rd quarter.
The cost of the Fed bringing inflation down to its target path may now be lessened if data show that the labor market is tight and economic activity is strong. For the headline consumer price index (CPI), which dropped from 9.1 percent to 8.5 percent in July, leaving behind the peak of 41 years, the FED must maintain its monetary tightening rate in a meaningful way. At this point, it could ease the recession pressure on the Federal Open Market Committee (FOMC).
Market forecasts are for NFP to increase by 300,000 in August. If the data to be released today meets or exceeds the forecasts, it may anchor the Fed's rate hike expectations for its September 21 meeting to 75 basis points. This could significantly increase the dollar's pressure on international assets. On the other hand, the NFP, which was at the level of 528 thousand in the previous month, showed an increase of less than 300 thousand in August, which may create a prediction that the Bank will downgrade in interest rate hikes by filing the soft-landing scenarios.
