EUROPEAN SESSION

In the European session, we don’t have much on the agenda other than a couple of low tier releases like the Swiss Consumer Confidence and the Eurozone Sentix reports. None of the data is going to change anything for the respective central bank, so the market reaction will likely be muted.

AMERICAN SESSION

In the American session, we just get the NY Fed Consumer Inflation Expectations survey. Last month, expectations for the 1-year ahead inflation increased to 3.6% vs 3.4%, but remained steady for the 3-year and 5-year horizons at 3.1% and 3.0% respectively. This is not a market-moving report but an increase on the 3-year and 5-year horizons could weigh on the market as the focus shifted to the Fed.

The very hot NFP gain on Friday with higher revisions for the prior months served as a wake-up call that the Fed could be forced to tighten monetary policy. The job gains have been much higher than the estimated breakeven rate. The unemployment rate fell to an unrounded 4.29% vs 4.33% in the prior month. Following the NFP report, the market fully priced in a rate hike by year-end with the total tightening standing at 30 bps right now.

If the situation in the Strait of Hormuz doesn’t change, oil prices will likely remain persistently elevated. The market can support that with a dovish or neutral central bank but not with a hawkish one as that’s going to weigh further on growth. This week’s US CPI report is going to be the most important event (barring a surprising breakthrough in US-Iran negotiations).

This article was written by Giuseppe Dellamotta at investinglive.com.