Strong payrolls data for June, beating market expectations, caused stock markets to rebound and Treasury yields to edge higher last week. Employment rose 222k vs market expectations of 178k in June, bolstering confidence amongst investors. U.S. treasury yields climbed with 10-year Treasuries reaching 6-week highs at around 2.39%.
The strong hiring data further fuels the Federal Reserve’s case for tightening monetary policy and raising interest rates. Fed minutes released earlier last week suggested that the Fed will target at least one more rate hike later this year and might start reducing its balance sheet as early as September.
The Fed is not the only central bank backing off of its accommodative stance. Mario Draghi, president of the European Central Bank, signaled that the bank is considering reducing their accommodative stance, according to minutes released also earlier last week. A pick up in growth and stronger economic forces within the EU has in part prompted the central bank’s decision.
This week’s economic data calendar will be full of tier 1 releases. Highlights will include the June Labor Market Conditions Index (Monday), June PPI (Thursday), and June CPI & June Retail Sales (Friday).
There are two major central bank meetings this week, with the Bank of Canada (BoC) meeting on Wednesday and the Bank of Korea (BoK) meeting on Thursday. The BoC is expected to increase rates by 25 bps to 0.75%, which would be its first tightening type measure since September 2010.
We will have a busy week of Fed speakers as many members are scheduled prior to the next blackout period. The highlight comes as Fed Chairwoman Janet Yellen delivers her semi-annual monetary policy and economic outlook testimonial (formerly known as the Humphrey Hawkins testimony) in front of the House on Wednesday and speaks before the Senate on Thursday.
Other Fed officials scheduled to speak this week include Williams (Monday), Brainard (Tuesday and Thursday), Kashkari (Tuesday), George (Wednesday), Evans (Thursday) and Kaplan (Friday).
A slew of corporate earnings releases is scheduled for the week as well, including those by some of the larger banks such as JPMorgan Chase and Citigroup.
