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Week Ahead – US GDP could get revised again; Eurozone PMI to show slowing activity

After a data-packed week, it will be a relatively quieter economic calendar with the Markit flash PMI for June being the main data of the week.

With an emergency summit planned for Monday by Eurozone leaders to discuss the Greek crisis, fears of a Greek default and ongoing developments of the negotiations will likely keep investors on alert. Tuesday will be dominated by PMI data as the Markit flash manufacturing and services PMI for June is released for Germany, France and the Eurozone. Manufacturing activity is expected to improve in both France (from 49.4 to 50.0) and Germany (from 51.1 to 51.5) but services activity is forecast to slow in France (from 52.8 to 52.5) and remain unchanged in Germany (at 53.0). Euro-wide PMI data is expected to show activity in both manufacturing and services slowing down slightly in June. Another important survey will be the German IFO Business Climate on Wednesday. The index is estimated to come in with a June reading of 108.0 from 108.5 in May.

The US will also see flash PMI releases, with manufacturing PMI out on Tuesday and services PMI on Thursday. Both manufacturing and services activity are expected to have increased slightly in June to 54.1 and 56.5 respectively. Housing data out on Monday and Tuesday will be watched closely too on signs of strengthening activity in the second quarter. Existing home sales are expected to have risen to 5.28 million in May from 5.04 million in April, while new home sales are forecast to rise slightly to 520,000 in May. Durable goods orders, which has been broadly weak during 2015, is not expected to show a recovery in May when it’s released on Tuesday and instead see another contraction of 0.5% as with April.

The biggest surprise out of the US data may come from the third estimates of first quarter GDP. Recent revisions to consumer spending as well as to construction, trade and wholesale inventory data have led to third estimate forecasts being revised up to show a contraction of just -0.2%. The second estimate was revised sharply down to -0.7% from an initial estimate of 0.2%. An even sharper upwards revision on Wednesday could fuel another rally for the dollar, which was weakened after the Fed’s dovish FOMC statement on Wednesday.

The UK takes the backburner next week with the only event that may impact the pound being the Bank of England’s inflation report hearings before the Treasury Committee in parliament on Tuesday.

In Japan, the minutes of the Bank of Japan’s latest monetary policy meeting will likely attract attention for the yen on Wednesday, which should provide more insight into the Bank’s latest outlook on inflation and growth as there is increasing doubt as to whether the BoJ will be able to raise inflation near its target by 2016 from current low levels. Also released next week are June manufacturing PMI, and May unemployment and inflation data. The May CPI rate is expected to fall to 0.4% annually from 0.6%, while the core CPI rate is forecast to fall to 0%.

Finally, HSBC manufacturing PMI for China is not expected to show much improvement in June and New Zealand trade balance data could add further pressure to the kiwi as it is expected to turn to a deficit of NZD 50 million in May.

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