Markets Prepare for Data-Heavy Week Amid Rising Rate Hike Odds

Financial markets are bracing for a data-heavy week ahead of the August employment report. Fed Chair Kevin Warsh's recent speech was hawkish, with no forward guidance provided on interest rate hikes. He emphasized that this summer's better-than-expected economic prints don't yet show underlying trends have improved meaningfully. Warsh also stated he'd be hard pressed to describe broad financial conditions as 'restrictive.'

The odds of a 0.75% rate hike over the next 12 months rose to about 60%, up from 35%. This week's economic calendar is packed with labor market data, including the August employment report, which is expected to show a figure above 50,000 for August. The three-month average has been dragged down to 20,000 due to July's weak print.

Revised Q2 productivity is also set to be released this week, and it's expected to match the preliminary increase of 2.2% y/y. The current productivity rebound may turn into a boom over the remainder of the Roaring 2020s and through the Roaring 2030s.