Week Ahead: The Calm Before Nonfarm Payrolls Storm
XM Group | Aug 27, 2021 09:25AM ET
The calendar is void of any central bank meetings next week, so all eyes will be on the latest US employment report. It will be infinitely important in determining how soon the Fed pushes the taper button. Beyond that, there’s also a heavy dose of data releases from the Eurozone, Canada, and Australia.
Inflation, jobs, and the dollar
There’s been a lot of talk lately about the Delta outbreak hitting the US economy and slowing down the Fed’s normalization plans. Some early signs indeed suggest economic growth is losing steam. For instance, the latest composite Markit PMI fell in August thanks to worsening supply chain disruptions, while consumer confidence cratered as virus fears returned.
That said, the wheels are not coming off either. The economy is already larger than it was pre-crisis, the labor market is recovering at a stunning pace, and inflation is unlikely to cool anytime soon. The Supreme Court just canceled the ban on evictions, which means rents could now begin to spiral, feeding the inflation story. Best of all, Congress is pushing ahead with another massive round of infrastructure spending.
Over in Australia, things don’t look so good. Most of the country is trapped in a strict lockdown, with the government waiting for the nation’s vaccination rate to rise to around 70-80% before relaxing restrictions. This means several more weeks of lockdowns, which will inevitably hit the economy. Hence, the upcoming GDP data for Q2 on Wednesday are already outdated.
The RBA stuck to its guns lately, signaling it will go ahead with reducing its asset purchases soon despite the onslaught of negative news, but there is a strong chance it abandons those plans at its next meeting. As for the aussie, it has been demolished lately and the pain train could continue as long as the lockdowns rage, especially with China losing steam too.
Speaking of China, the nation’s PMI business surveys for August will also hit the markets on Tuesday.
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