While we bask in summer weather there are still three things on our plate to watch in the Economy. Canadian Mark Carney now heads up the Bank of England, hired because they couldnt find a non-corrupt Brit for the job. The ECB has a meeting planned, and then while everyone is on vacation, US employment figures are to be released.
Forecasting markets is all about keeping one step ahead of the game. Don't look at where the ball is, look at where it's going to be. The best thing to do if you want to stay ahead of the market is to look at what's coming up in the days ahead. With that in mind, let's examine some events worth watching between now and the weekend.
Firstly, new Bank of England governor Mark Carney will preside over his first Monetary Policy Committee meeting this Thursday. The MPC is the BoE's FOMC equivalent, setting interest rates and making decisions on stimulus and monetary policy. Outgoing governor Mervyn King has been trying for months to raise the Bank's quantitative easing program from 375 million pounds to 400 million pounds, but has been repeatedly voted down.
Carney is expected to be even more pro-easing than King, and markets have high expectations that he'll be able to push through more stimulus spending, but not much is expected to take place at this meeting. Expectations that the BoE will be increasing its easing have been lowered even further as new data has just been released showing the UK has just posted its strongest manufacturing growth in two years and the housing market is picking up as well. Still, the results of this first-ever meeting with Carney at the helm will have an impact on British markets as UK investors look for some signal as to how he'll govern the bank.
Secondly, the ECB will also be meeting on Thursday. Expectations that there will be a rate cut are extremely low, as strong manufacturing data contraindicates the need for central bank intervention. Liquidity remains a problem throughout the Eurozone, as banks deleverage, yields rise, and equities fall, but it seems likely that the ECB will rely on forward guidance to try to keep yields in check.
Thirdly, and perhaps most importantly, Friday is job report day in the U.S. Most businesses will be closed Friday as part of an extended July 4th long weekend, so analysts are expecting bigger moves on fewer market participants. The consensus is that it will be announced that the economy added 155,000 jobs in June, down from 175,000 the month before. Keeping in mind that the Fed's QE Infinity is in fact predicated on employment figures, there's more riding on these reports than just market expectations, but it would be very surprising if there's a significant move in the government's (doctored) employment rate this month.