Week Ahead Preview:
21st of July

Traders are closely watching the European Central Bank’s interest rate decision and accompanying press conference at the start of the week. Eurozone inflation has eased significantly since the beginning of the year, with the YoY Consumer Price Index falling from 2.5% in January to 2.0% in June. This decline has supported the ECB’s recent trend of rate cuts.

Given that inflation is now within the ECB’s 2.0% target, markets expect the central bank to keep interest rates steady at 2.0% during this month’s meeting. However, a 25-basis point rate cut remains possible in September, coinciding with the release of updated economic projections for growth and inflation in the eurozone.

Meanwhile, monetary policymakers are increasingly focused on the implications of a potential trade war between the United States and the European Union. President Trump recently imposed 30% tariffs on European goods, set to take effect in August. In response, the EU is considering a retaliatory package of tariffs worth up to €72 billion, targeting specific categories of U.S. products. The situation could escalate further, possibly involving additional taxes or sanctions on U.S. interests, including technology firms, raising the risk of heightened trade tensions.

As a result, investors will be paying close attention to the ECB’s press conference for any signals on whether the bank is prepared to provide further stimulus if the European economy suffers under the weight of a trade dispute.

Separately, markets are also awaiting the release of preliminary UK Purchasing Managers’ Index data for July. The manufacturing PMI is hovering near the 50-point threshold that divides contraction from expansion. Any upside surprise in the manufacturing and services figures could point to a strengthening UK economy, potentially leading to rising inflation. This would complicate the Bank of England’s ability to cut interest rates, especially given the elevated inflation in June, when the YoY core CPI reached 3.7% and headline CPI stood at 3.6%.

Economic Data Highlights (UAE time)

Monday, 21st of July

• NZD- Inflation rates (Q2)
• USD- Leading Index (Jun)

Tuesday, 22nd of July

• RBA Meeting Minutes
• Fed Chair Powell speech

Wednesday, 23rd of July

• CAD- Housing Price Index (Jun)
• USD- Existing home sales (Jun)
• US Crude inventories

Thursday, 24th of July

• EUR- Manufacturing &services PMI (July- Flash)
• GBP- Manufacturing &services PMI (July- Flash)
• USD- Manufacturing &services PMI (July- Flash)
• USD- New home sales (Jun)

Friday, 25th of July

• GBP- Retail Sales (Jun)
• USD- Durable Goods (Jun)