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by Darius Anucauskas

Weekly Outlook: Jul 23 – Jul 27; ECB Decides on Monetary Policy; EZ PMIs and US GDP in Focus as Well

Monday is likely to be a quiet day from the economic calendar perspective, as the only significant piece of data that we will be getting is going to be the US existing home sales for the month of June. This data shows the change in the annualised number for existing residential buildings that were sold in the last month. Home sales are expected to have rebounded to +0.5% mom from -0.4% in May. This data helps us measure the strength of the US housing market. Normally, a reading above the forecast is in favour of the US dollar, so forex traders should stay cautious during the release of this data.

Tuesday could be a slightly more exciting day in terms of economic data. The Eurozone is set to release its preliminary manufacturing and services purchasing manager’s indices for July. The manufacturing PMI is expected to have dropped by two tenths of a point, going from 54.9 to 54.7. The services index is expected to have slid as well, to 55.0 from 55.2. Investors watch both figures carefully, but still, the services PMI carries more weight, as it accounts for the larger share of the Eurozone’s economic output.

Some European countries are preparing to release their July PMI numbers separately. Among those will be Germany, whose manufacturing PMI is expected to have declined from 55.9 to 55.5. But Germany’s service PMI, which also accounts for the larger share of the country’s economic output, is expected to have improved by a pinch. The forecast is currently sitting at 54.6 against the previous 54.5. Euro traders should keep a close eye on the data, as worse than expected numbers could raise some concerns and the common currency could take a hit.

We get preliminary manufacturing and services PMIs from the US as well. The expectations are for the manufacturing PMI to have declined slightly, from 55.4 to 55.1, and for the services PMI to have remained the same at 56.5.

During the early hours of the Asian morning on Wednesday, New Zealand will take centre stage with the release of its employment numbers, together with its trade balance. The unemployment rate is expected to have gone up in Q2, from 4.4% to 4.5%.

After New Zealand’s data, Australia will show the financial world what’s happening with the country’s inflation. The yoy CPI rate is expected to rise from the previous +1.9% to +2.2%. The number would be in line with the RBA’s inflation target between 2 and 3 percent over the medium term.

The european morning will bring Germany’s IFO business climate index, which measures the business conditions in Germany. The figure is expected to have declined slightly from the previous 101.8 to the 101.6. The DAX and the Euro traders should stay cautious during the release of this data.

On the political arena, the European Commission President is expected to meet Donald Trump in Washington, where they are set to discuss the trade relations between the EU and the US. Jean-Claude Juncker is expected to come with a proposal for a trade deal between the two economies, but we will have to wait and see whether this could please the US President.

On Thursday, the spotlight falls on the ECB and its interest rate decision. No changes are expected here and the main refinancing rate is expected to remain at its 0.00% mark. Mario Draghi will then hold a press conference 45 minutes after the rate announcement. Investors will pay close attention to the tone and the specific wording of the ECB president’s speech, trying to figure out when could the next hike come into play. During the previous meeting in June, the European Central Bank said they are planning to keep rates unchanged at least throughout the next summer.

Friday will finish off the week with the US preliminary QoQ GDP numbers for the second quarter. This should give a clue on how fast the Fed could raise rates. The GDP figure is expected to come well above the previous one. The expectation is for the economy to have grown 4.1% qoq, from the previous quarter’s 2.0%. If that’s the case, then the new figure could be the highest since Q3 of 2014. USD traders should be very cautious when trading during the time of the release, as volatility could increase significantly. 

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