FOMC Meeting: The decision is taken

With only one more employment report to go, it seems plausible that the FOMC has already decided what to do in its next meeting. Although wage pressures remain soft, the job market has probably improved enough to justify beginning the normalization cycle in September. 

"With rates market pricing a very timid normalization process, we see some scope for USD strength in the weeks ahead," notes Barclays.

However, in line with the FOMC's rhetoric, that the expected path of the fed funds rate for the next couple of years is probably more important than the actual date of the lift-off. In that regard, wage developments will continue to be monitored by markets to assess the speed of the normalization cycle.

Data-wise, next week looks somewhat quiet. Retail sales on Thursday should confirm consumers' optimism in an environment of economic momentum. A 0.6% and 0.4% increase for the headline and core figures are expected, respectively, in line with consensus. On Friday, industrial production will be published, together with preliminary data for Michigan's consumer sentiment. On the former, manufacturing data will probably continue to be influenced by slow growth overseas and a strong USD (Consensus 0.5%) while the latter should remain strong (Consensus 93.5).