Markets are all but sure that the Fed will stand pat next month, so it’s the meetings in November and December that are drawing investor interest. The Fed has made it clear it will be data-dependent as it charts its monetary policy path.
The will-they-or-won’t-they question around the Federal Reserve and the endgame for interest rate hikes will cast a shadow over the markets, as investors peer through every piece of economic data and then tweak their expectations on what happens next. In short, buckle up.
European markets look set for a higher open, with the pan-European STOXX 600 at two-week highs. Inflation reports from Germany and Spain later in the day will provide further clues on price pressures in the region ahead of the euro zone inflation report on Thursday.
Traders have raised their bets on a 25-basis-point European Central Bank rate hike in September, a slight shift from expectations of a pause following a sharper-than-expected contraction in euro zone business activity.
Over in Asia, the dollar was little changed against a basket of currencies after a steep dive overnight, hamstrung by sliding Treasury yields.
Australia’s inflation slowed to a 17-month low in July, signalling that interest rates might not need to rise again. The report sent the Aussie 0.17% lower.
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