Weekly Outlook, 5 – 9 July

Banks and economic data!

By: Ahura Chalki

Market analyst – IFC Markets

Federal Reserve meeting minutes, RBA interest rate decisions, and ECB’s Special Strategy Meeting can spotlight the week ahead. And while Monday is Independence Day and a holiday in the US, Europe will start the week with Service PMI data. The week ahead is not such a busy week; however, there are always events and data to take care of them. Let’s take a brief look at the most important events of the week ahead. 

European Service PMI – Monday

Despite the remarkable recovery in the manufacturing and industrial groups, the service sector was still under pressure. And while Monday we will have the European service PMI numbers, the new version of Cronaviruse, called Delta, is the latest concern for the service sector, especially in the Tourist industry and countries Like Italy and Spain, the countries that their economy so much depends on Tourism. However, last months they have started easing the lockdowns, and despite the higher prices than pre-pandemic, it is still expected to have better results. Euro still trading weaker against the USD, and our expectation is still to see the current trend, incredibly as long as it is trading under 200 DMA at 1.200.

RBA Interest rate decision – Tuesday 

Our expectation from Tuesday’s meeting with the reserve bank of Australia is to leave its cash rate at the current record low and adopt a “flexible” approach to its asset purchasing plan. After earlier fast recovery that put the RBA ahead of any tapering plan, recent outbreaks of corona various added the doubts on the timing of leaving the crisis-era stimulus. The Australian index, AU200, has weakened slightly in the last two weeks, but with the coming week data and RBA meeting, holding the overall uptrend above 50 DMA at 7,100 is more likely. 

FOMC meeting minute – Wednesday

What we know from the meeting is that some FED members started to talk about tapering and rate raise in 2023; however, there are some members like James Bullard that spooked about a rate rise in 2022, much sooner than FED projects by the end of 2023; however, he’s not a voting member this year, but will be voting member next year. And we know the opinion of Fed chair, Mr. Powell, and New York Fed’s John Williams has the support of the majority. The minutes should spark more light on Fed’s tapering program and, generally, its Monetary policies. As US stocks fall after the FED meeting, we expect the same reaction after publishing the meeting minutes. 

ECB meeting minutes – Thursday

ECB also will publish its meeting minutes later this week on Thursday. We are not expecting any surprises in the meeting minutes. Market participants will also be following the news coming out from a series of meeting sets in the following weeks to polish up its strategic view. 

As we know, ECB is planning to change its inflation target, which is currently at 2%. ECB’s goal is to complete the review by coming September. Also, European Central Bank policymakers will have a special meeting in Frankfurt to review the bank’s strategy. 

UK GDP – Friday

After confirmation of a 1.6% reduction having seen Q1 GDP, UK monthly GDP number will provide more data of recent economic activities and recovery after the weaker start in the first months of 2021. First-quarter was strongly affected by ending the Brexit transition period and the January lockdown; that’s why we can be more optimistic for this report. Same as last week, still we are optimist on Futsie to see that in higher levels. 

Chinese inflation – Friday

Chinese producer prices have been rising in the last months, as the cost of raw materials has soared due to higher commodity prices, expecting to affect consumer inflation. Investors and traders will be following these numbers closely to see how the second-biggest economy is recovering. 

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