🇺🇸 Next Week Will Be Short and Very Volatile for the Markets

US markets are closed on Friday for Independence Day. Therefore, the critical Non-Farm Payrolls data will be released on Thursday. The new week consists of only 4 trading days.

On Wednesday, the new Fed Chairman Kevin Warsh will speak for the first time. There is a risk of a significant shake-up in the markets. If he touches on monetary policy, very careful consideration is needed.

🔥 Why is Warsh's Speech So Important?

Warsh had already promised "regime change" at the first Fed meeting on June 17th. In his post-meeting remarks:

• He did not release the dot plot and criticized the tool, saying it is "not useful for conducting monetary policy."

• He implied that he was shelving forward guidance.
• He gave a "determined, unanimous, and clear" message about achieving the 2% inflation target.

Warsh is expected to address the following topics in his Wednesday speech:

1. Approach to data dependence – Unlike former Fed Chairman Powell, Warsh opposes short-term forecasting. He signaled fewer press conferences, saying, "Press conferences are useful, but you should only hold them when you have something important to say."
2. Probability of interest rate hikes – Half of the FOMC members expect at least one rate hike this year. Only one official predicts a rate cut. Warsh's stance on this issue is critical for the markets. 3. Fed Communications Reform – Warsh established five separate working groups to review the Fed's policy: communications, balance sheet, data sources, productivity and labor, and the inflation framework. These groups will complete their work by the end of the year.

📊 Non-Farm Payrolls Coming Thursday

The data, normally released on Friday, was moved to Thursday due to the holiday.

Market Expectations and Possible Scenarios:

• Strong employment data could strengthen predictions that the Fed may raise interest rates.

• Weak data could strengthen Warsh's hand and initiate discussions about interest rate cuts.

According to analysts, JOLTS job openings and ADP private sector employment data came in above expectations. If non-farm payrolls also exceed expectations, the likelihood of a Fed interest rate hike will be further strengthened.

⚠️ Risk Factors for Markets

1. Warsh's Surprise Statements – The new chairman said he dislikes forward guidance and will take a data-driven approach. However, with inflation still hovering above 4%, any hawkish message could shake the markets.
2. Geopolitical uncertainty – Tensions continue in the Strait of Hormuz despite the 14-point agreement between the US and Iran. Oil prices are approximately 30% higher since the beginning of the year.
3. Fragility in technology stocks – Technology sell-offs spreading from Asia to the US are weighing on the Nasdaq. Warsh's speech could create extra volatility in this delicate balance.

🎯 Summary

Wednesday: Fed Chairman Warsh speaks

Thursday: Non-Farm Payrolls

Friday: Markets closed for holiday

Warsh's speech on Wednesday could determine the direction of the markets in the coming weeks. If a signal of an interest rate hike comes, the dollar will strengthen, and risky assets will be pressured. If reassuring messages about falling inflation come, markets may relax.

A short and busy week awaits us. Stay alert.

This content is not investment advice. Markets are highly volatile; do your own research.