Markets seem to be stabilising after recent gyrations. In rates markets, Federal Reserve cut expectations are stabilising at around 100bp of easing for this year, although that is still a level shift from around 60bp last month. However, indicators such as the VIX equity volatility measure – which failed to decline further yesterday – and still elevated implied bond volatilities suggest lingering unease.
Of course, the big data point people are looking at this week is the US CPI. Before its release, we will get the PPI indicator, and taken together with the CPI it should give markets a decent idea of what to expect later this month for the PCE, the Fed’s preferred inflation measure. Expectations are for another set of benign prints, but after the weak jobs report, markets feel a little jumpier around data releases.