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    Week Ahead – Inflation and central bank decisions in focus as markets eye positive resolution in Greek crisis

    After a turbulent week where the Greek crisis and China’s equities slump dominated market headlines, the focus should return to economic developments and central bankers in the coming week, pending a positive outcome over the weekend’s debt negotiations with Greece and its creditors.

    It is hoped that the Greek crisis will come to a conclusion next week as Saturday’s Eurogroup meeting is seen as the final deadline for the Greek government to agree to a solution. If an agreement is reached, the race will be on to finalize the details of the deal and make preparations to re-open Greece’s banks. Should a deal not be reached, EU authorities are likely to put in contingency measures at an EU summit on Sunday for a possible Grexit. Either way, Greece should once again dominate the headlines when markets open on Monday.

    The US will start the week with the release of retail sales data on Tuesday. Retail sales are expected to grow by 0.3% month-on-month in June – down from 1.2% rise in May. On Wednesday, manufacturing data is out in the form of industrial production figures and the Empire State Manufacturing index. Producer prices are also published but more important will be Fed Chair Janet Yellen’s testimony before the House Financial Services Committee. Yellen will also testify before the Senate Banking Committee on Thursday. Initial jobless claims and the Philadelphia Fed Manufacturing index are released on Thursday too. On Friday, building permits are expected to decline to 1,110k in June from 1,275k previously, while housing starts should improve slightly. Annual inflation is expected to pick up in June with the CPI rate rising to 0.2% from 0% in May. Core CPI should also edge up slightly. Lastly, the University of Michigan preliminary confidence index is estimated to improve to 96.5 in June.

    The Eurozone will release final June CPI figures on Thursday with annual inflation expected to stay unrevised from the flash estimate at 0.2%, down from May’s 0.3%. Before that though on Tuesday, industrial production figures for the Euro area are published which is forecast to rise by 0.2% on the month in May. German ZEW economic sentiment data out on the same day should also get some attention, with sentiment expected to have worsened in June.

    The European Central Bank will hold its scheduled monetary policy meeting on Thursday. Although no change in policy is expected, depending on the outcome of the Greek talks, the ECB may announce some emergency measures to support the Greek banks in case of an agreement.

    The Bank of Japan and the Bank of Canada will also announce their latest rate decision on Wednesday. No change is expected in Japan but the decision will be more finely balanced for the Bank of Canada on the back of recent weak economic data. The BoC last cut its rate in January to 0.75% and a July cut cannot be ruled out. In other data for Japan, final industrial production figures for May are published on Monday.

    More industrial production data is expected for China. Growth in industrial output is estimated to have eased to 6.0% in June, and fixed-asset investment is expected to come in at 11.2%. But GDP data out the same day is likely to grab more attention. Second quarter GDP is forecast to slow to 6.8% from 7% in Q1 – the slowest rate since 2009 at the height of the crisis.

    For the UK, inflation and unemployment data will be closely watched as the Bank of England ponders when to start raising interest rates. CPI figures out on Tuesday are expected to show annual inflation staying unchanged in June at 0.1%. Unemployment is also expected to stay unchanged at 5.5% but average weekly earnings are forecast to jump to 3.3% in May from 2.7% previously.

    CPI data for New Zealand on Thursday may influence the Reserve Bank of New Zealand’s next move, who has hinted at more rate cuts. Annual inflation is expected to rise slightly to 0.3% in the second quarter but this is still well below the RBNZ’s median target level of 2%.

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