With the Fed top of the list of central bank meetings in Dec, what data should we focus on?
The Fed is going to be grabbing all the attention as we head into December as the central banks have their last meetings of the year. Here’s the data that could potentially make a difference.
There’s one thing on the minds of Fed and FOMC members and voters, “Inflation”. It seems to have become the one piece of the jigsaw that’s yet to fit in place properly. A Dec hike has been pretty much nailed on over the last few months but repeated comments from Fed members has swon some seeds of doubt. Inflation just isn;t playing ball for some members and that injects more than enough risk for the Dec 13th FOMC. As it’s been shown in the past, the dollar can find itself being bought in the days leading up to an FOMC where action is expected. We’ve got just over two weeks left of data before that meeting so here’s what we should focus on.
- 27th Nov: New home sales – Nothing inflationary here but the Fed will want to make sure there’s no shocks
- 28th Nov: FHFA & Case Shiller house prices – House prices have been steady and there’s no real signs of bubbles. If that stays the case here, the Fed need not worry about hiking to contain an overheating housing market
- Consumer confidence – Anything related to the consumer is important. It’s been running hot so as long as there’s not a huge miss, it won’t rattle the Fed
- 30th Nov: Income, spending, & PCE – This will be a biggie to watch. The PCE is an inflation report the Fed watches very closely. PCE at 1.6% & Core at 1.3% y/y currently. Any miss here will sink the buck. Anything higher will calm nerves about the hike and the buck will rise
- 1st Dec: ISM manufacturing PMI – The prices paid & received components will be the main numbers to watch. There’s so NFP this week as we don’t get one when the 1st falls on a Friday
- 2nd Dec: Fed members go dark – The Fed enter their “Blackout” period. No more Fed speaches until the Thursday following the meeting.
- 5th Dec: ISM non-manufacturing PMI – Same as above, looks at the price components for the US services industry
- 6th Dec: US Q3 2017 productivity and costs index – Although lagging data, good numbers here will be welcomed by the Fed. “Productivity” is another central bank buzzword of the minute. Unit labour costs will add to the inflationary picture, if only from a broad view
- 7th Dec: Consumer credit – Another look at the consumer and this time, how they’re managing debt. Hiking rates squeezes borrowers. Credit hasn’t been flaggin any major problems so unless there’s a big change in the numbers, this should pass by without a fuss
- 8th Dec: NFP – Even a shocking headline shouldn’t knock Fed hike expectations as many Fed members believe the US is at full employment. After the strong run, they’ll be expecting more volatility in the NFP number, and so should we. What can;t be ignored in is the wages components. That’s what we’ll be watching carefully
- Michigan consumer survey – Sometimes a market mover, sometimes not. This close to an FOMC, there’s a hgh chance it’s a market mover. Watch the inflation expectations numbers
- 12th Dec: FOMC begins their two day meeting. PPI is reported and as per the Michigan survey, and with such focus on prices, any big variations from expectations will move the dollar
- 13th Dec: D-day for the FOMC and we get maybe the biggest data point into it with CPI. We should be well over any weather related messing around, and with CPI at 2.0% & Core at 1.8% y/y, we’re well into Fed target territory. on or above those levels and it might be the icing on the cake for hike traders. A miss of 2pp or more and that could put a very late cat among the pigeons
There’s plenty of other data points to watch but for seeing the wood from the trees, it’s going to be any prices data that will get most attention. This week might see plenty of to and fro in the dollar but if we are to see the start of some USD strength into the FOMC, it will likely start this Thursday & Friday with the PCE and ISM numbers, if they’re good of course. Whatever you think about the dollar for the longer-term, don’t ignore the possible theme for it over the next two weeks, as there’s going to plenty of opportunities to grab some pips.
I’ll also highlight the other central bank meetings;
- 5th Dec – RBA
- 6th Dec – BOC
- 14th Dec – BOE & ECB
- 21st Dec – BOJ
As there’s going to be very little focus on the BOE, ECB and BOJ after the Fed, we’ll likely see markets quickly go into holiday mode from Friday 15th Dec.
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