The pricing for the December contract in the Fed funds futures market continues to oscillate between 65bp and 75bp of cuts.
Today, Empire manufacturing and TIC data are on the calendar. Some specific focus will inevitably be on the new jobless claims report. Our US economist thinks that retail sales will probably get a lift from the robust auto sales numbers for April, while industrial production will be held back by the fact that manufacturing surveys continue to point to falling production with lower energy prices limiting the upside for oil and gas extraction. This week, we have retail sales and industrial production as the highlights. When it comes to data, the strong jobs figures for April were followed by inflation figures that did offer some tentative signs of cooling-off in service inflation, below-consensus PPI, and higher-than-expected jobless claims ( a signal that lay-offs are surging). The first force will be driven by data and Fedspeak today the second by negotiations which should resume on Tuesday.
The two main opposing forces at the moment are the declining short-term US rates (as more Federal Reserve rate cuts are priced in) and the debt-ceiling impasse in Washington. The dollar enters a new week with a broadly unchanged set of sharply contrasting factors which saw it test the lows, first, and then rebound quite sharply in a rather eventful month of May. USD: Debt ceiling jitters raise upside potential in near term
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