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FX Week Ahead: GDP revisions, Eurozone flash inflation estimates

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The markets head into the final week of the month and the quarter. With the June 30, Friday marking the end of the quarter ,which also coincides with the Triple Witching event, the markets could turn choppy.

A busy week stands out for the US dollar while in the eurozone the flash inflation estimates will be key. Regional inflation estimates will also be released which will give a clearer picture of the eurozone’s consumer prices data.

This week will also see the GDP numbers coming out from the UK, US, and Canada. Here’s a brief outlook on the key market events to watch out for in the forex markets this week.

US: Durable goods orders, Final GDP, and Core PCE

The week ahead from the United States will see key economic indicators coming out that could potentially sway the market expectations from the Fed. The week starts off with Monday’s durable goods orders.

According to economists polled, core durable goods orders are expected to rise 0.4% on a month over month basis. This would potentially offset the 0.5% decline posted in the previous month. The headline durable goods orders are however expected to contract 0.7%, extending the 0.8% declines from the previous month.

Later in the week, the first quarter-final gross domestic product (GDP) data will be coming out. The final revision is expected to show no major changes after GDP was revised from 0.9% initially to 1.2% as of the second revision.

The major data point for market participants and the central bank officials will be the personal consumption expenditure or PCE data. Headline PCE is expected to rise 2% on the quarter, slightly down from 2.1% that was registered previously. Personal consumption is expected to rise 0.6%, same as the previous quarter.

Eurozone: Inflation estimates

The markets will get a glimpse of how consumer prices behaved in June. In May, data from Eurostat confirmed that headline inflation rose 1.4% and core inflation rose 0.9%. This was lower than the previous month’s reading.

Inflation in the eurozone has once again become the key sticking point. Officials at the ECB are still wary and prefer to wait for further evidence that inflation is rising. On the other hand, key regions including Germany and Netherlands are putting pressure on the ECB to tighten monetary policy on account of stronger GDP growth.

The ECB had signaled at its previous meeting that there would be no changes to monetary policy in the near term. The inflation estimates for June could potentially influence the market expectations. Despite the fact that ECB has signaled no changes, the markets maintain a hawkish expectation from the ECB. That policy will be tightened in the near term.

The ECB had also dropped the reference to the downside risks in interest rates, which was seen by some as a hawkish, but the subtle reference on the central bank’s acknowledgment on monetary policy and better economic conditions.

UK: Final revised GDP

The Office for National Statistics will be releasing the final revision to the first quarter GDP. In the second revision, the nation’s GDP was lowered to 0.2% from 0.3% that was reported on the first estimates.

The National Institute of Economic and Social Research (NIESR) which is an independent organization has projected that GDP growth in the UK could average around 0.2%.

The final GDP figures will not likely dent the sentiment in the British pound any further. The Bank of England had voted to keep interest rates unchanged at its meeting earlier this month. The central bank Governor, Mark Carney said that it was not the right time to hike interest rates. His comments came after the BoE had a split vote with a majority of just five. Inflation is also seen rising sharply, but wages remain weak.

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