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Yesterday's surprisingly hawkish commentary from the Federal Reserve's Dennis Lockhart has already come under pressure, as US employment figures continue to underperform ahead of Friday's all important US jobs report.
Today's weak ADP non-farm payrolls and last Friday's poor employment cost index figure are hardly the most convincing subset of data points, yet it does raise question marks over what the jobs report will look like and what impact that could have upon the possibility of a September rate rise.
The US markets have taken a positive turn following yesterday’s Fed-fuelled selloff, with a spike in the US non-manufacturing PMI leading to a post-2007 high. The US services sector appears to be in rude health and growing at a relatively unprecedented rate. Given the slowdown in US manufacturing expansion in July, the outperformance of services comes at an opportune moment for the US economy.
Markets turn to 'Super Thursday' where the reduction in Bank of England meetings means the delivery of a rate decision, statement, minutes, Q&A session, and the inflation report, all rolled into one afternoon. Ultimately it will be the fine details that count as market participants attempt to gauge with any greater clarity exactly when the rates will rise. For now, Q1 2016 is the likely scenario yet the reaction of markets to a US hike could impact BoE caution.
The US oil inventories drawdown continues to gather pace, with another 4.4 million barrels cut from last week’s stockpiles. Given the reduction in rigs, coupled with price-sensitive demand increases coming during driving season, it is not a surprise that inventories continue to fall. Yet while oil prices spike off this news, we are unlikely to see an end to the current global oversupply issue, and thus any upside is likely to be short-lived for now.