Derek Halpenny, European Head of GMR at MUFG, suggests that the dramatic jump in the ‘Philly Fed’ manufacturing index was certainly eye-opening and the scale of rebound in the main index (from -2.8 to 12.4) and the fact that all the sub-indices increased as well clearly point to the potential for an improvement in the manufacturing sector.
“This data series is volatile but even a modest improvement in the manufacturing sector would be significant for monetary policy expectations and the dollar as this sector has been the dominant source of bad news for the US economy. The fact that the annual change in the value of the dollar has been decelerating and is now back close to unchanged on an annual basis would certainly tie in with dollar strength now becoming less of a drag on manufacturing activity.
There is no real data of note today apart from the Michigan Consumer Sentiment index. However, we have a number of Fed speakers with Vice Chair Dudley and Fed Presidents Rosengren and Bullard speaking. All are voters and Bullard to some degree is the unknown given he seems to swing back and forth in terms of his views on inflation. Given Yellen’s words and the DOTS cuts this week, it will be interesting to hear other FOMC voters’ take today.”
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