Quiet markets may be an August tradition with US investors increasingly following Europe's lead and taking a break, but that has not stopped market developments, namely the oil price, hitting headlines.
Last week crude prices notched up new records and inched closer to $50 a barrel. Market chatter about the price gains and the potential impact on the global economy rose to new levels and is not expected to die down this week.
But although the hullabaloo about oil continues, it does not mean the price will necessarily follow suit for long, suggested Mr John Roberts, head government bond trader at Barclays Capital in New York.
"You've got all these people yelling their heads off who never said a word when oil went from $25 to $40. Now everybody's talking about it. It probably means we're closer to the end of the trend than the beginning," he said.
"August is typically a European holiday and it is becoming more and more of a US one. Lots of times, something will happen and, because there aren't so many people, moves tend to get exaggerated."
Some say heavy speculative positions could prompt a sharp reversal if the price did tick lower as dealers rushed to lock in profits.
Economic news will trickle in this week. Business confidence data from Germany's Ifo Institute will take precedence for eurozone investors as they ascertain what impact higher oil prices and current terrorism fears are having on the region's largest economy.
In the US, markets will study whether the University of Michigan's final measure of consumer sentiment for August confirms the dip reported in preliminary findings.
Those interested in the US economy will also focus on the annual Federal Reserve symposium in Jackson Hole, Wyoming, which begins on Friday and coincides with the release of the first revision of US second quarter gross domestic product.
Growth is expected to be revised lower from 3 per cent to about 2.8 per cent after a surprise widening of the trade deficit in June that prompted economists to rethink assumptions. "The data are just going to confirm what we already know," said Mr Tim Mazanec, senior currency strategist at Investors Bank and Trust in Boston.
He said uncertainty in the markets meant investors would pounce on comments from the Jackson Hole meeting.
"It's really all about the Fed," added Mr Mazanec. "The ECB is not signalling it plans to change rates anytime soon and there's no real reason for the Bank of Japan to move either, so we're all looking at the US."
Improving Japanese numbers prompted speculation earlier this year that policymakers may finally be able to abandon their zero interest rate policy but recent data have shown deflation still lingers. Consumer price data for Tokyo in August, due on Friday, are expected to show prices were still fractionally lower year-on-year.
The UK, France and Germany will also see the first revisions to second quarter GDP. All three are expected to remain unchanged quarter-on-quarter at 0.9 per cent, 0.8 per cent and 0.5 per cent respectively.
After a rebound in July data for new homes and permits, economists expect firm numbers for US durable goods and home sales this week. Last week, Fannie Mae, the mortgage financier, raised its forecast for US home sales after a strong first half. - (Financial Times Service)
