oday, no less than four Fed members will provide their views on monetary policy including Janet Yellen whose speech is tonight in London is expected to be on global economic issues. Financial markets will try and grab some hints regarding the Fed's path towards normalisation of monetary policy. Markets estimate the likelihood of a third rate hike this year below 50%. We believe the Fed will be very focused on economic data rather than geopolitical development and we consider that recent economic data is not fully supporting a continued normalisation of the economy.
Yesterday, non-defense capital goods recorded their highest decline since last December at -0.2% m/m below consensus 0.1 m/m. Earlier last week, the US Manufacturing PMI came in below expectations at 52.1 vs 52.7 expected. We recall that a level above 50 indicates expansion and we are slowly approaching towards this threshold.
On Thursday, the US GDP will be released and for the time being, data for the second quarter is significantly weaker than what has been released during the first quarter. We believe there are clear downside risks on the US GDP at the moment. Therefore, the EURUSD pair may bounce higher towards 1.1300 in the short-term.
By Yann Quelenn