Data watchers had better cancel any planned holidays: the words of central bankers have driven markets of late, but now economic numbers will take the lead. The publication of the Federal Open Market Committee (FOMC) minutes and recent statements of several Federal Reserve officials have made it clear that in the run-up to the June meeting data will be more important than ever: if they are strong enough they would quite likely trigger a rate hike.
BNP Paribas Group Chief Economist William De Vijlder discusses the latest market drivers.
Investors face a double challenge: anticipating how the numbers will look and where the threshold for the Fed lies. The latter is especially tricky. What is clear is that volatility will be high. Positive surprises in the US should have a negative impact on equities, bonds, commodities, emerging markets but, to the extent that they weaken the euro, would be welcomed by the ECB. This is a reminder that the euro is as much driven by what the ECB does or says as by what happens in the US. With ECB policy on hold, one can argue that the EURUSD rate is currently far more dependent on the Fed than on decisions made in Frankfurt. Europe needs faster growth in the US, both from a perspective of international trade and because of the impact on the exchange rate.