Important Week Coming Up Packed With Economic Data, ECB Meeting In Focus

The Week That Was

On Wednesday last week, the Bank of Canada left interest rates unchanged at 0.50% at its monetary policy meeting. The bank now estimates real GDP growth to be 1.3% in 2016 from 1.7% previously estimated, and 2.2% in 2017 from 2.3% forecast previously. However, the bank is expecting above-potential growth from the second half of 2016 on rising demand from the US. The BOC statement was less dovish than market expectations. The Canadian dollar strengthened after the announcement on large volumes – especially a large buildup of short positions on USDCAD, pushing the pair back below 1.3000 from 1.3050 ahead of the decision.

On Thursday, the Bank of England also held interest rates on hold at 0.50%, confounding market expectations of a cut to 0.25%. The sterling soared to the highest level in two weeks against the US dollar at $1.3480 while British stocks turned negative after the announcement.

In PPI data released on July 14, U.S. producer prices recorded their biggest gain in a year in June due to higher cost of energy products and services. The producer price index rose 0.5 percent last month, the largest increase since May 2015, after jumping 0.4 percent in May.

The number of people filling for US unemployment claims last week stayed steady at the lowest level since mid-April of 254,000. The number had been predicted to come in at 263,000 by economists.

US retail sales also rose more than predicted last month at 0.6%, following the revised 0.2% gain in the previous month that was smaller than initially reported. Core sales, used to calculate gross domestic product, rose by a larger-than-expected 0.5 percent for a second month.
Early on Friday, the risk-sensitive Australian dollar briefly dipped against the yen, following news that an attacker killed at least 80 people and injured scores when he drove a truck at high speed into a crowd watching Bastille Day fireworks in the French Riviera city of Nice late on Thursday.

Gold prices ended on Friday 0.23% higher at $1,337.73 compared with thursday’s settlement, reversing earlier losses in late trade on Friday. The late spike came about after a group within Turkey’s military attempted a coup to overthrow the government of President Erdogan, leading a flight to the safe-haven. The coup was eventually unsuccessful and the government regained control of the country a few hours later.

The Week Coming Up

Minutes from the RBA’s most recent Monetary Policy Meeting will be released on Monday, providing in-depth insights into the economic conditions that influenced policymakers’ decision on current interest rates. The Australian dollar is expected to see heightened volatility during the announcement.

US Building Permits, measuring the number of new residential building permits issued during June is scheduled to be released on Tuesday. The number of permits is anticipated to reach 1.15 million from May’s 1.14 million. This is an important gauge of future construction activity because permits applied and issued are considered a proxy for the number of building units to be built in the near future.

The European Central Bank will hold its first monetary policy meeting since the UK’s decision to exit the European Union on July 21st . ECB President Mario Draghi’s words will be carefully watched in his press conference over any possible hints of further stimulus and on how big an impact the Brexit fallout is expected to have on the Eurozone economy.

It will be an important week for UK economic data as retail sales, inflation and unemployment figures are all to be reported this week. June inflation data due on Tuesday is expected to show annual CPI edging up from 0.3% to 0.4%. On Wednesday, the unemployment rate is forecast to come in unchanged at 5% for May but average weekly earnings growth is expected to accelerate from 2% to 2.3% in the three months to May. Retail sales are predicted to decline in June as British consumers are thought to have slowed down (0.6%) on their purchases both before and after the referendum. The British pound is expected to witness significant volatility during the week.

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