Few weeks are as replete with potential sources of market movement as this one.  It's a good thing too because markets--especially bond markets--suddenly seem to be right back in the same old range that looked set to be broken by the recent FOMC Announcement.  Not much has happened since then, but we did get to see Chair Yellen do an almost complete 180 last week with respect to her much more dovish tone 2 weeks ago.  It's enough to make you wonder what is going on at the Fed.  What's up with the excessive 'back and forth,' including more than the normal amount of contradiction between members (and even contradiction of oneself)?

Perhaps it's as simple as the first ever lift-off from a 0% Fed Funds Rate being sort of a big deal.  But perhaps there is something more to it--something that's been kicked around by analysts and even mentioned in passing by a few Fed members, but that hasn't been given much spotlight.  I'm talking about the "dry powder" argument.  In a nutshell, the thesis is that the Fed wants to have "something to cut" if the economy enters another downturn.  While it's true that this isn't a popular conclusion, it's also true that 95% of the folks that actively consider the next downturn are ALWAYS considering the next downturn.  In other words, to give this thesis much credence, you either have to be a perma-bear, or you have to think you're seeing something actually change in an alarming way.

I don't think the Fed is necessarily seeing an alarming sign in the domestic economic data, but when we consider that data in conjunction with the global headwinds that would likely results from a Fed rate hike, the "dry powder" argument becomes somewhat more defensible. You wouldn't have to be a perma-bear to wonder if 2014-2015 was the last expansionary push of this economic cycle.  In fact, you could consider the shift in momentum of some big-ticket economic reports that will see another installment this very week!  Case in point, the 6-month average in Private Payrolls is in the process of confirming a break below the 24-month average.  It doesn't do this very often, and historically it hasn't been favorable for growth when a break like this one happens (i.e. first time breaking lower in more than a few years).

Private Payrolls, of course, is a component of the Employment Situation, which also gives us NFP this Friday at 8:30am.  Even before that, markets will have plenty to sink their teeth into.  Fed speakers abound, with no fewer than 11 speeches by Friday afternoon (Yellen, herself, on Wednesday). 

Apart from the US-centered news and events, we might also keep an eye out for any beat or miss in the EU CPI data.  When it's deviated from forecasts or even from the previous reading, it's also been at the scene of the crime on several big moves for global bond markets.  Of course, this could have a lot to do with the fact that it always comes out right around the end of the month, but with the ECB still weighing their accommodation options, CPI is closely watched.