One volatile week has ended and another is starting today. If volatility was a considerable entanglement for you last week and then expect the same issue to surface once again with a number of key events. The Chinese economy has been the major angst for investors during the past few months and traders are apprehensive about the central bank’s growth target of 7%. The Chinese Yuan brought an enormous amount of volatility for traders and if you think that the sell off is over then you need to re-tune your expectations. The Central Bank of China does want to abate the currency further, but they also want to make sure that they control the pace of this weakness. Although, it is terrifically challenging, but then again central banks have their way in managing the market participation and move the currency in any direction whenever they desire.
The GDP readings released in the Eurozone printed many headlines for investors who are not sure what to make of this. France confirmed their stagnation and the economic engine of the Europe, Germany has expanded well below the expectation. This is not the kind of news, which can make Mr Draghi pleased. The falling oil prices, weaker currency and support of the central bank should have produced a lot more tenacious outcome as compared to what we witnessed.
Without any doubts, Greece has been a major obstacle for economic growth in the Eurozone. This week, the focus will be towards their third bailout package and different European Parliaments will deliver their wording on this agenda. A timely ratification of those in all relevant European Parliament will enable the release of funds in a timely fashion and thus enabling the country to pay its bills which is due on the 20th of August.
Investors will also keep a close eye on the IMF role on this agenda, as they have a very disparate and off- beat view this time and are of the mind frame that the country’s debt is not manageable. The fund does not agree with the argument that only debt restructure- by extending the maturities and lowering the borrowing rates can help the country. Therefore, we could see some more pressure for Chancellor Angela Merkel to sell this idea to her fellow citizen.
Back in the U.S., it will be all about the latest FOMC minutes which are due on Wednesday and investors will be weighing different options if and when the Fed will increase the interest rate given where the inflation is today and the rout in the commodity prices has become a lot more worse as compared to a few months ago. The inflation data for the U.S. which is also due later in the week could be the main denominator in this inflation equation.