The following article is based on research by Marshall Gittler, Head of Investment Research for FXPRIMUS.
FXPRIMUS Indicators and events for week beginning July 18: ECB meeting, preliminary July PMIs
The week starts off slow, with little on the schedule today. But things gradually pick up with a few but important indicators, and by Friday we get the first round of the July PMIs.
The highlight of the week probably won’t be that exciting: the ECB meeting on Thursday. The central bank is widely expected not to change their interest rates or to make any other policy moves. As we saw last month, when they kept policy steady, there was no unusual volatility. In fact, the range in EUR/USD was below average, probably because people held off trading ahead of the meeting but found little impetus to change prices afterwards. This week, I expect ECB President Draghi to make some comments on Brexit and perhaps on the situation of European banks. But I don’t look for any fireworks.
The other big day is Friday, when Markit will release the preliminary PMIs for the major industrial countries. This time only, the firm will release a flash PMI for Britain as well “to help provide clarity on the potential impact of the UK’s EU referendum on the economy.” The June PMIs were lacklustre; the global PMI was unchanged at 51.1, below its long-run average for 10 consecutive months. Economists expect the July figures to be weak as well as every PMI that’s forecast is expected to decline from June’s already-depressed level. The prospect of weaker global growth could contribute to USD weakness if investors again push out their estimate for when – or even if – the Fed is likely to raise rates again.
For the EU, the other important points for the EU are the ZEW survey on Tuesday and European Commission consumer confidence index on Wednesday.
The spotlight will remain on the UK as there is other key data out this week in addition to the PMIs. We saw last week that investors are still paying attention to “pre-Brexit” data. The CPI on Tuesday is expected to accelerate somewhat. That could set back expectations for Bank of England loosening in August, which would tend to support the pound. Wednesday we get UK employment data and Thursday, retail sales.
There isn’t much crucial data coming out from the US. Thursday we get the Chicago Fed national activity index and the Philadelphia Fed index. Last Friday’s worse-than-expected Empire State index on Friday raises the risk around these indices.
Otherwise, the US data centers on the housing market, starting with the NAHB housing index on Monday, then housing starts & building permits on Tuesday, and existing home sales and the FHFA house price index on Thursday. Last month’s housing data was fairly weak, so investors will be looking for some rebound to confirm that the economy is still healthy.