FXStreet (Bali) – David Fritz, FX Strategist at Nomura, summarizes the key events to watch out for this week, with the dominant topic being Greece, while US retail sales, CPI as well as the ECB and BoJ monetary policy meetings will also take center stage.
Key Quotes
“Before the work week starts, the major headlines will likely be all about the Greek Summit. In the past couple weeks, markets have been awaiting clarity on the Greek issue, and alternatively becoming risk off and risk on in the interim. This weekend may provide clarity, as it seems the Eurozone members have issued an ultimatum that will lead to a decision one way or the other.”
“In US news, there will be the US Fed’s beige book, as well as retail sales and CPI. These data points will provide further insight into the potential for a Fed hike this year, which Yellen stressed in her speech this past Friday would be appropriate, although unexpected events could delay it. The May retail sales showed a stronger path of consumer activity than expected, indicating improving consumer fundamentals, and it will be important to see if this momentum continues.”
“In the central bank corner, we expect the ECB and BOJ to hold policy steady. However, recent indications from Canada indicate that there should be a cut expected (25bp to 0.5%) at the upcoming meeting. Growth has been underperforming and the “insurance” that the BoC had taken out with a cut earlier no longer seems sufficient.
“For the ECB, some attention may want to be paid. They have previously indicated their wiliness to take creative steps, and have mentioned that should a particular country become stressed and financial conditions sufficiently tightened, they may engage in asset purchases of the targeted country or countries. Depending on what happens with Greece, this could be important for Greece or the periphery countries more broadly (see NEMO, 30 June 2015). Data from the eurozone have already shown deteriorating economic momentum, and it may be interesting to see how this is judged by the ECB.”
“The UK will have a few data points of interest next week, namely the inflation report on Tuesday and the employment report on Wednesday. We continue to look for diminished slack in the economy and pressure on prices, which would feed into earlier expectations for BoE action. In our model portfolio, we have already turned long GBP again, on the expectations of flows, economic outperformance, and monetary policy divergence.”
“Another region of interest next week will be China. Much has been made of the country as the equity market tumbled, and worries spread of contagion into the broader economy. Our economists have tried to downplay this notion (see China: Equity market selloff poses only limited risk to the economy, 8 July 2015). Nevertheless, markets will likely be more focused than usual on everything China, even if it is only on backward looking data. And in terms of data next week, there will be retail sales, industrial production, and GDP for Q2 all on Wednesday. There will also be China property prices, New Yuan Loans, money supply, and trade balance data announced throughout the week.”
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