What are we waiting for this week?
For those that arent familar, the S&P500 from a macro perspective can be used as a correlation with the current state of the economy out in the US (broad but still a great indicator from a TA perspective). Now for a closer indication of any economic turning points within the economy, and therefore markets, we have to take into account other macro economics. Of which we keep you up to date with anyway. But the principle remains.
A quick glance at the S&P500, it doesnt take much to work out that these levels that we are trading at currently is very interesting. For those that have been following, will know that the US economy has held dispite high interest rates. But we also understand that the US economy’s financial structure is not designed to hold at higher rates of interest at a peak. With a reccesion almost 100% on the cards, and speculation of a Dovish pivot from the FED. Could the S&P500, although a broad indicator, be signalling a potential top for the US economy, as the FED slips into a Dovish downward sprial as the year ends? Slowing tightening and followed by cutting interest rates crashing the USD into Q1/ Q2 of next year? Very likely if this is the case with the US economy now potentially is experiencing a slowdown in growth?
So what are we waiting for this week?…
Well today, FED chair powell speaks. Which will give some insight into where the FED is currently sitting with regards to its next FOMC meeting, where they will decide between a 50 basis point rate hike, and a 75 basis rate hike.
And to be completely honest, i think the likely hood of a 50BP rate hike is greater. But, I will be paying close attention to Core PCE aswell this week. As a downside surprise would support dollar peak speculation, and that inflation has truley peaked. As a result we’d see yeilds fall along with the dollar. Global markets like US equities, COMMs and risk currencies like GBP would all most likley perform very well into year end.
However, ill also be paying close attention to ISM Manufacturing PMI. The confirm move below 50, would most likely suggest towards economic struggle due to a strong dollar. Which, in this case has halted exports which is huge for the US GDP. Further adding a massive need for the FED to cut interest rates to start to move the economy out of a recession and stimulate economic growth.
If the figure is below 49.7, expect NFP/ employement change to be negative for the USD.