Key economic events and reports for the week ahead
The key report next Monday will be the US pending home sales index. A downside surprise in the data will be another confirmation that current elevated prices in the market are not sustainable and deter new buyers; suggesting home prices may be poised to retreat.
On Tuesday, traders will be watching the report on business activity in the manufacturing sector in China, CPI in the Eurozone and unemployment in Germany. The pace of expansion in manufacturing activity in China is expected to slow down in August, and the Eurozone CPI is expected to rise by 2.8% YoY. Higher than expected EU inflation could reinforce rumors that the ECB will start discussing a PEPP cut at the coming meeting.
The main report on next Wednesday will be the US employment report from ADP. The agency is expected to indicate a job gain in August by 500K. Positive jobs surprise may set the stage for rumors that the Fed will start reducing asset purchases in October.
Markets will look forward to the NFP's August report on next Friday. Non-Farm Payroll growth is expected at 665K. Of course, this is less than the Fed officials would like to see in order to start reducing QE in October, as suggested by the head of the Atlanta Federal Reserve Bank Rafael Bostic, but a positive deviation may boost expectations of more hawkish Fed rhetoric at the next meeting in September. Weak job growth or a small negative surprise is unlikely to affect QE expectations, as Powell gave a clear signal this week that the Fed will move to cut stimulus later this year.
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