Central bank meetings in Australia, the UK, Japan and the European Central Bank will attract the market’s attention the coming week, while Chinese Services PMI, trade figures and inflation will give insights into the situation of the world’s second largest economy.
Next week will probably start the holiday period, which usually means markets that are more quiet and with less liquidity. However, some important shifts have taken place in markets in recent weeks such as the realization that the US economy is doing better than originally thought and that the Fed could bring forward the date at which it starts to raise interest rates. The Fed meeting this week dismissed such fears but many market participants are worried that the strong data could become too loud a signal for the Fed to ignore. This fear in turn led to the biggest one-day loss for the US stock market since February.
Regarding the US dollar and the US economy, there will be few planned data releases and events with market-moving potential, leaving markets to mostly reflect on this week’s statistics and events. ISM non-manufacturing for July, the revision to Durable Goods orders and International Trade for June will be on tap.
Next week’s major event will be the European Central Bank meeting on Thursday, August 7. The ECB will get a chance to react to this week’s flash inflation rate for July, which dipped to 0.4% compared to 0.5% the previous month. Inflation below 1% can be a worrying sign since if it keeps falling, it could in theory turn into deflation – something the ECB would prefer to avoid. In a more positive turn of events, Eurozone unemployment also dipped to 11.5% from 11.6%. The ECB is not expected to announce any new measures since it will also be the beginning of its own holidays and it would much prefer to have its updated staff forecasts in front of it before it thinks of a move. These forecasts come out in September. Still, it will be useful to hear Mario Draghi comment on the latest developments and data. Eurozone retail sales for June will be released two days before the ECB meets on Tuesday.
Turning attention to China, Chinese HSBC and official services PMIs will attract attention as will Chine imports and exports for July. Manufacturing PMIs out of China recently have come out relatively upbeat.
It will be an important week for Australia watchers, as in addition to the Chinese data, Australian unemployment, trade balance and retail sales will come out. The Reserve Bank of Australia will also announce its decision on interest rates on Tuesday and any hints about future monetary policy or comments about the Australian dollar, could be very important.
The Bank of Japan will also announce its monetary policy decision on Friday, August 8 and the country’s current account balance will also be released on the same day. In other planned events, the Bank of England will meet on Thursday but it is not expected to act or announce anything except that the interest rate will remain at 0.50% and leave the size of the QE program unchanged. Construction and services PMIs, industrial output and trade balance are some other statistics that will come out of the United Kingdom.
Overall it will be a busy week for major economies except the United States.