US week ahead: ISM, Powell and NFP – Danske Bank

Markets have reacted strongly to Federal Reserve Chair Powell’s words on Wednesday and next week he is due to testify in Congress, point out analysts at Danske Bank. They see the NPF report on Friday, likely to confirm that wage growth is strong in the US.

Key Quotes:  

“In the US, job reports for November are due out on Friday. We expect that nonfarm payrolls rose around the current trend of 190,000. However, the most important part of the job reports is the average hourly earnings. It seems the tighter labour market continues to put upward pressure on wage growth. In November, we expect that average hourly earnings rose +0.3% m/m, which would take the annual growth rate to 3.2% rounded up.”

“On Monday, ISM Manufacturing data are released. We think Markit PMI is a better indicator for manufacturing as ISM manufacturing has been too high compared to reality over the past couple of years. We continue to believe ISM should move lower but it has been stubbornly high for longer than expected.”

“Fed chair Powell testifies before the Joint Economic Committee of Congress on Wednesday 5 December. This is the last opportunity for him to send new signals to markets before the Fed meeting on 19 December, where we expect another 25bp.”