`Investors` attention will be paid primarily to the European Central Bank and meeting and decision along with press conference on July 25. In addition to the ECB, it is worth paying attention to further economic data, including PMI and the US GDP data.
Economic data from the eurozone still do not seem the best, forecasts for the economy also. The chances for a larger slowdown are rising, and inflation expectations remain at very low levels. As if that was not enough, the European Central Bank was to start a discussion on a more symmetrical inflation target than the current one, which says that inflation should be below but close to 2 percent. Adding the phrase to ECB mandate that inflation may also be slightly above 2 percent could extend the period of monetary policy easing.
The decision of the European Central Bank regarding interest rates seems to be very interesting, as well as the Bank's statement on possible further steps. Currently, investors are wondering when interest rates will be cut - now or should we will wait until autumn. The market is currently pricing with a 56-percent probability of interest rate cuts already in July. Hence, monetary easing in the euro area may be another step of the ECB. The only question is when it will happen. The decision of the European Central Bank will be taken on Thursday at 1:45 PM. At 2:30 PM, the press conference of Mario Draghi, the President of the ECB, will begin.
The day before the ECB decision, a number of PMI readings will appear. They can also influence the shaping of monetary policy. On Thursday at 10:00 the Ifo business climate index will be released. This index has recently fallen to the lowest level since the beginning of 2015.
Friday will bring the release of preliminary US GDP data for the second quarter. This period in the US economy is likely to be weak, but not enough to give an argument for cutting interest rates by the Fed by half a percentage point at the end of July. One of the bright sides of the US economy should still be consumption, which may grow indicated by recent retail sales data and the fact that unemployment is low, wages are rising and consumer confidence is high. The data will be published on Friday at 1:30 PM.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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