Focus will momentarily shift away from the UK’s decision to leave the EU with this week’s prominent data releases coming out of the US. The situation has shifted significantly in the past month or so. Certainty that the Federal Reserve would raise interest rates at least once this year has all but faded. Indeed, interest rate futures now point to a greater possibility of a cut than a rise at the
next three Fed meetings with only a slim chance of a rise at the December meeting. Non-farm payrolls, out on Friday, have failed to meet analysts’ expectations for two months running. May’s figure of 38,000 (from 162,000 expected) killed the chances of an increase at the June meeting, and the resultant market turmoil from Brexit has done the same for any July rise. Expectations for June are an addition of 180,000 jobs driven by gains across service sectors and the unemployment rate is likely to tick up slightly to 4.8 per cent from 4.7. US service sector activity in June, as measured by the ISM non-manufacturing index, is available on Wednesday. Growth in the sector slowed in May with the index dropping to 52.9 from 55.7 in the previous month. Analysts believe a rebound in June will send the index back up to 53.4. Minutes from the Fed’s June meeting are also available on Wednesday. They are likely to highlight members’ concerns about the risks to the US economy from international developments, as well as the declining appetite for an interest rate rise this year. The UK services Purchasing Managers’ Index for June is out tomorrow. Some slowdown in growth is thought to have occurred but any Brexit fallout doesn’t seem likely to show yet and the index will remain above the crucial 50 level at 52.7 from 53.5 in May. Central bank meetings this week take place in Australia and Sweden. The Reserve Bank of Australia is unlikely to act until second quarter inflation figures become available on July 27. Analysts at HSBC foresee a rate cut at the August meeting if the inflation data disappoint.
……………..By ANDREW WHIFFIN