This week’s U.S. economic calendar features testimony from Fed Chairman Powell to the semiannual Senate Banking and Housing (Tuesday) and House Financial Services (Wednesday) committees. Traders will be watching closely for any change to the Fed’s view on inflation and potential shifts in its rate policy timeline. Powell will likely indicate the need to see further evidence of weakening price pressures before lowering interest rates.
Markets are implying a 71% probability of a quarter-point cut at the FOMC’s September policy meeting, a 75% probability at the December meeting, and 64% probability at the January ’25 meeting. The end-of-year implied overnight rate is 4.83%, down from the current implied 5.329%.
The economic calendar also includes release of the latest CPI (consumer inflation) data on Thursday and PPI (producer inflation) on Friday.
Today’s dollar index is -0.04% at 104.83, virtually unchanged from Friday’s close with traders sidelined ahead of Powell and the inflation data. The dollar’s spot returns for today span +0.10% vs. NZD to -0.17% vs. GBP. U.S. Treasury yields have changed little from Friday, also reflective of the pre-data trading pause.
Mexico’s economic calendar includes CPI data on Tuesday, central bank monetary policy minutes on Thursday, and Industrial Production on Friday.
Several key elections continue to dominate the recent news cycle. President Biden’s poor debate performance against Trump a week ago has left November’s Democratic ticket in disarray. Calls from donors for a Biden replacement are increasing daily, but the Biden administration continues to push back forcefully on speculation for any change.
France’s weekend elections gave the most votes to a left-wing coalition but was left short of enough seats to form a government. The stalemate limits the scope of policies that either party can pursue, calming markets which had been concerned over a far-right takeover.
