This week will see a wave of important economic data from around the world, with the European Central Bank (ECB) interest rate decision being one of the main focuses of global markets.
ECB Expected to Hold Off, Ready for September
The ECB is expected to hold off on a second interest rate hike this week, while keeping the option open for September. After raising borrowing costs in June due to a surge in energy prices, the resurgence of Middle East conflict and uncertainty over traffic in the Strait of Hormuz have brought the ECB's inflation estimates back to square one, according to the Governor of the Central Bank of Greece, Yannis Stournaras.
ECB President Christine Lagarde will receive a host of important data before the September meeting, including two more inflation readings, second-quarter growth figures, and several business surveys. The first of these will be published on Friday, when S&P Global releases its monthly purchasing managers' survey.
Dozens of Global Interest Rate Decisions Scheduled
Aside from the ECB decision, this week will also see purchasing managers' indices from around the world, the appointment of the new Prime Minister and Chancellor of the United Kingdom, and inflation data from Japan and Britain. A dozen global interest rate decisions are scheduled, with Indonesia and South Africa expected to raise rates, while Russia and Hungary are likely to cut them.
In the US, this week has been relatively quiet in terms of economic data, with the Federal Reserve currently in a quiet period ahead of its July 28-29 meeting. Key data releases this week include weekly jobless claims on Thursday and new home sales on Friday.
Asia & UK Data Also in Focus
Canada is expected to report lower headline inflation in June on lower gasoline prices, while Japan is due to release its national consumer price index on Friday, a closely watched regional inflation gauge to gauge the pace of the Bank of Japan’s policy normalisation.
Growth data was also led by purchasing managers’ indices, with Japan and Australia each releasing preliminary readings that will shape their central bank’s expectations.
Trade data is also in focus, with export figures from Japan, Taiwan, South Korea and Malaysia themselves set to determine how robust Asia’s export recovery remains.
Impact on Markets and the Ringgit
This week’s tight economic calendar, combined with prolonged geopolitical risks in the Strait of Hormuz, has the potential to keep regional forex markets volatile in the near term.
For the Ringgit, Malaysia’s trade data scheduled this week will be a key indicator of how strong the country’s export recovery remains, while regional interest rate decisions will also influence investor sentiment towards the local currency overall.
Key Takeaways
The ECB is expected to hold off on a July rate hike, but remains open to a final hike on September 10.
A dozen global interest rate decisions are scheduled this week, including Indonesia, South Africa, Russia and Hungary.
The US Fed is in a quiet period ahead of its July 28-29 meeting, with a relatively quiet week of economic data.
Japan is due to release its national consumer price index on Friday, a key indicator to assess the Bank of Japan’s policy normalisation.
Malaysia’s and the Asian region’s trade data this week will be key indicators of regional export recovery.
As long as geopolitical and global monetary policy uncertainties persist, the market is expected to continue to closely monitor every central bank decision and economic data that is to be announced throughout this week.
