Weekly Market Outlook: US Data & ECB Meeting in Focus

The US

The economic calendar for the week ahead will focus on the US markets, with a number of releases focusing on various aspects from housing to flash manufacturing estimates. The week culminates with the release of the second quarter advance GDP report.

The economic data this week will likely give more clarity for the Federal Reserve. While the markets are already discounting a 50 basis point Fed rate cut, the data is likely to give more impetus.

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The Eurozone

In the eurozone, the European Central Bank’s monetary policy meeting is set for Thursday. Speculation is rife that the ECB will announce a major shift to its monetary policy. However, the key interest rates are likely to remain unchanged. There’s the prospect that the ECB could potentially restart its bond purchase program to stimulate stagnating inflation and growth.

The markets elsewhere are relatively quiet with no major market-moving events lined up. Besides the ECB meeting, the flash manufacturing and services PMI reports from Markit for the eurozone and the US will be coming out. The data is likely to shed light on how the respective economies’ businesses have fared in July.

New Zealand

New Zealand will be reporting its trade balance figures this week. The data also covers the imports and exports for June. The release of the trade balance figures will likely show how New Zealand’s economy fared during the second quarter of the year.

Now let’s take a more in-depth look at the upcoming events.

US Durable Goods Orders & Advance GDP Report

The main items on the agenda this week will be the release of the durable goods orders report for June. The data will likely impact the expectations of the second-quarter GDP. Economists forecast that the headline durable goods orders will rise 0.5% on the month in June.

In the previous month, durable goods orders fell 1.3%. Excluding transportation, core durable goods orders are forecast to rise just 0.1% on the month in June. This follows the revised 0.4% increase we saw in May. Overall, the impact of the durable goods orders could be seen in the GDP. A better than expected report could see the GDP being revised higher over the course of the next few releases.

The advance GDP report is due on Friday. The median forecasts point to a 1.8% increase in the quarterly GDP. This marks one of the slowest paces of increases in the US economy in recent years.

On a quarter over quarter basis, the GDP price index is forecast to rise by 1.3% for the quarter ending June 2019. This follows a 0.6% increase in the previous quarter. The forecasts are quite dovish which gives room for an upside surprise.

Besides the GDP report, the personal consumption expenditure report will also be released.

ECB to Hold Monetary Policy Meeting

The European Central bank will be holding its monetary policy meeting this week on Thursday. The main question, heading into the monetary policy meeting is what the central bank could do to revive growth and inflation.

Previously, minutes from the June ECB meeting showed that policymakers were seriously concerned about inflation and growth. This comes after the ECB ended its bond purchase program last December.

ECB President Mario Draghi had previously indicated that the ECB could take action as early as July. However, there isn’t much clarity as the ECB could either cut interest rates further or even restart its bond purchase program.

For the moment, the markets are expecting to see further clarity via the forward guidance. It is possible that the ECB will announce a cut to rates or restart of QE program by autumn this year. Regardless, the outcome of the ECB meeting is going to be quite dovish.

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