Focus on Fed, euro zone's economic health

Fri Aug 7, 2015 12:36pm EDT
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By Ingrid Melander

PARIS (Reuters) - The search for clues to whether the Federal Reserve will raise U.S. interest rates in September for the first time in nearly a decade is set to intensify next week.

U.S. employment rose at a steady clip in July and wages rebounded after unexpectedly stalling in June, signs of an improving economy that could open the door wider to a rate hike soon. But Friday's data did not cement expectations the Fed will act next month.

"Because this report was not extraordinarily strong, it was simply in line with expectations, that leaves the markets having to look toward other data," said Paul Christopher, head global market strategist at Wells Fargo Investment Institute in St. Louis.

July retail sales, expected on Thursday, will be the key number to look for, while comments by policymakers Dennis Lockhart and William Dudley will also be carefully scrutinized.

Atlanta Fed President Lockhart, a centrist who votes on the Fed's policy-setting Open Market Committee, is due to speak on Monday, with New York Fed President Dudley, seen as a dove and a close ally of Fed Chair Janet Yellen, following on Wednesday.

On the other side of the pond, Greek bailout talks, UK labor market figures and euro zone second quarter GDP data will dominate the agenda in a week where most Europeans will be on summer holidays.

"Unemployment may creep higher again due to election uncertainty ... but rising wages are likely to be the key focus, given the Bank of England's gradual shift to more hawkish commentary regarding medium-term inflation risks," ING analysts wrote in a note. Monthly jobless and average earnings data are due on Wednesday.

While there is nothing like the high drama of recent months in the Greek saga, with signs of progress in the reform talks, negotiations are entering a crunch period this week, with Athens keen to wrap things up just after Aug. 15 to receive aid in time to make an Aug. 20 bond repayment to the European Central Bank.   Continued...

Workers box jars of pasta sauce at a plant run by Chelten House Products in Bridgeport, New Jersey July 27, 2015.   REUTERS/Jonathan Spicer