Since this is the Macro Wrap, I wanted to get away from earnings for a moment to set the table for the very busy economic calendar over the next 2 weeks. First and foremost, the FOMC release is on Wednesday, July 31st. That’s the big kahuna, the elephant in the room. The key to the release will be the rhetoric – does the Fed lead the market’s expectations towards beginning the tapering in September’s release? If so, then I expect dollar higher, bonds lower, and stocks lower. If not, then I expect dollar lower, bonds higher, and stocks higher.
But the economic calendar is busy outside of the Fed. Here is a quick summary, both in the U.S. and elsewhere:
- July 31st – FOMC Release
- Aug 1st – ECB and Bank of England Releases
- Aug 1st – ISM Manufacturing and European PMIs
- Aug 2nd – U.S. Non-farm Payrolls and Unemployment Rate
- Aug 5th – ISM Non-Manufacturing and European Services PMI
- Aug 8th – Bank of Japan Release
That’s about as jam packed as you can get over the next 2 weeks. Most importantly, the Fed, ECB, and BoJ all release their monetary policy statements in that period, and will be the most closely watched aspect of all the reports. But if the Fed hints at tapering in September on Wednesday’s release, then the U.S. Payrolls number takes on added importance as market participants will place increased weight on that number in guiding the Fed’s September decision.
In the meantime, the dollar, bonds, and stocks are all at interesting junctures. The dollar index is right at its 200 day moving average:
Meanwhile, bonds have been unable to bounce with stocks, despite Bernanke’s dovish comments two weeks ago:
And, of course, stocks are at all-time highs:
Over the next 2 weeks, we’ll have a much better sense of whether these trends continue or reverse. As has been the case over the past few years, we’re at the behest of the words of the central bankers. Buckle up.