A significant amount of key US and European economic data is released this week. The main data highlight from the US today is the all important ISM manufacturing. We expect the ISM to stay below 50 points reflecting weaker orders and rising inventories. We think the USD should remain firm this week, despite its slight drift lower in overnight Asian trade. US bond yields are likely to remain under near term upward pressure. Fed voting member, Jeremy Stein, commented on Friday that the market should not be “excessively sensitive” to recent jobs data when deciding to pull back QE. Stein’s comments come ahead of this week’s June non-farm payrolls data (Friday). The tone of his speech indicated he wants the Fed to stick to a tapering plan, unless derailed by the US economic data.
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