The signs of strength given by the employment report in the US relaunched the question of the timing of the first rise in interest rates in this country, which will be the central theme of this week.
In recent months, the labor market has gained greater momentum, culminating in the creation of 321,000 jobs in November and a rise 0.40% of wages. The increase in wages, which until last month had been contained, was the latest sign of strength in the labor market.
Given these data, investors’ expectations regarding the timing of the rise in interest rates have been reformulated. Now, investors continue to estimate an increase sometime in June but expect interest rates may rise twice until September 2015. A minority expects an increase in interest rates in March or April this year.
This week these new expectations will be tested by economic data, among which are the retail sales and the Jolts report (Job Openings and Labor Turnover Survey). Briefly, this report measures through surveys, provision of paid work in the USA. Although this indicator is not very followed by the financial markets, it has recently gained some importance to be cited frequently by President of FED, Janet Yellen.
In addition to FED, investors will follow economic data in China, trying to anticipate their effect on the monetary policy of the Central Bank of this country. This institution has implemented various monetary measures, to combat a greater deceleration than desired of its economy. So if the Chinese economy continues to give signs of weakness, investors’ expectations regarding additional measures by the Bank of China intensify.
In Europe, in addition to economic indicators on inflation November, will be held the second operation the ECB’s marginal lending to European banks, the so-called TLTRO (Targeted longer-term refinancing operations). These operations are one of the measures announced in the summer by the ECB, in order to stimulate the provision of credit by European banks, through the injection of liquidity in the interbank market interest rates close to 0%. The first operation took place in September, but banks only required 82 600 M. €, which was well below the 400 000 M. € which were the maximum ceiling that the ECB was willing to give. For this operation, investors expect the European institutions ask the Central Bank for an amount in between 100 000 M€ and 130 000 M€.