After almost eleven years of dovish monetary policy positioning, the ECB is finally ready to increase its interest rates this week. However, it is not the only major central bank to update monetary policy this week, with the Bank of Japan also due, whilst the People’s Bank of China will also be watched. There will also be a focus on inflation again, with CPI data from Canada, the Eurozone, the UK and Japan. The week finishes off with the flash PMIs which will show how major economies are faring moving into Q3.   

Watch for: 

  • North America – Flash PMIs and housing data for the US, along with Canadian CPI
  • Europe & Asia – the ECB and BoJ rates decisions, with CPI inflation for the Eurozone (final), UK and Japan, and a series of flash PMIs
  • LatAm – Mid-month inflation for Mexico and Brazil

North American data

Tuesday 19th July

US Building Permits


Permits are expected to fall to 1.680m in June (from 1.695m)

US Housing Starts


Starts are expected to increase to 1.560m in June (from 1.549m in May)

Wednesday 20th July

Canada CPI


The headline inflation is expected to increase to 8.0% in June (from 7.7% in May) with core inflation remaining at 6.1% (from 6.1%)

Existing Home Sales


Sales are expected to reduce slightly by -1.8% to 5.30m in June (from 5.41m in May) 

Thursday 21st July

US Weekly Jobless Claims


Claims are expected to increase slightly to 245,000 (from 244,000)

Philly Fed Manufacturing


A slight improvement to -1.2 is expected in July (from -3.3 in June)

Friday 22nd July

Canada Retail Sales


Sales are expected to be +1.5% in May, increasing YoY sales growth to +10.0% (from 9.2% in April). 

US Flash PMIs


The flash Composite PMI is forecast to fall to 52.1 in July (from 52.3)

On a week with little key US data, the Weekly Jobless Claims may be something of note. Recent data has been trending higher. Higher jobless claims suggest the labor market is beginning to deteriorate, adding to the number of indicators flashing negative economic growth trends. Claims have come in higher than expected in each of the past six weeks and are now at their highest since February.

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The flash PMIs are an important forward-looking indicator that the Fed will be increasingly watching as the policy tightening becomes ever more aggressive. Since hitting 57.7 in February, the US Composite PMI has fallen in each of the past three months. It is expected to fall again to 52.0. This is still in growth, but closing in on stagnation.

Market Reaction: 

  • USD reaction will likely come from elsewhere this week, with any signs of other economies under pressure generating a safe-haven USD positive bias
  • CAD should be positive on any upside surprise in the CPI.

Europe & Asia

Tuesday 19th July

UK Unemployment & Earnings


Headline unemployment is forecast to stay at 3.8% in May (3.8% in April), with Average Weekly Earnings (ex-bonus) expected to increase slightly to 4.4% (from 4.2%)

Eurozone inflation (final)


Final HICP inflation is expected to be unrevised with the headline at 8.6% and core inflation at 3.7%.

Wednesday 20th July

People’s Bank of China rates 


No change is expected to the 1year Loan Prime Rate of 3.7%



Headline inflation is expected to rise again to 9.7% in June (from 9.1% in May) with core CPI rising to 6.2% (from 5.9%) 

Eurozone Consumer Confidence 


Confidence is expected to continue to deteriorate to -25.0 in July (from -23.6 in June)

Thursday 21st July

Bank of Japan monetary policy


The BoJ is expected to hold the deposit rate at -0.10%.

ECB monetary policy


The ECB is forecast to increase rates by +25bps: The main refinancing rate to +0.25% (from 0.0%) and the Deposit Rate to -0.25% (from -0.50%)

Friday 22nd July

Australian flash PMIs


The flash Composite PMI is expected to fall slightly to 52.3 in July (from 52.6 in June)

Japan core CPI


Core inflation is expected to increase slightly to 2.2% in June (2.1% in May)

Japan flash PMIs


The flash Composite PMI is expected to drop to 51.8 in July (from 53.2 in June)

UK Retail Sales


Core sales (ex-fuel) are expected to decline by -0.2% MoM in June (-0.7% in May) which would leave YoY sales falling by -5.8% (-5.7% in May) 

Eurozone flash PMIs


The flash Composite PMI is expected to fall further to 51.0 in July (from 52.0)

UK flash PMIs


The flash Composite PMI is expected to drop to 52.5 in July (from 53.7 in June)

The European Central Bank (ECB) decision will be a major event this week. In the last meeting, they signalled a +25bps hike in July and another in September. The question is whether this 25bps is upgraded to a 50bps hike. Given the strong inflation outlook and weakness of the Euro (although exchange rate targeting is supposedly not something they consider), front-loading a 50bps hike could be a possibility (getting in more hikes before the mounting recessionary pressures mean they are unable to). Markets will also be looking for how the ECB intends to approach the anti-fragmentation tool (tackling widening core/periphery bond yield spreads). The Bank of Japan is expected to be unchanged at -0.10% leaving it as the only major central bank not to raise rates.

Inflation is also key for major economies this week. Final June Eurozone HICP is not expected to see any revision to confirm the increases already in the prelim reading. Headline inflation is expected to jump again for the UK CPI, close to double figures at +9.7%, still on track to increase to the Bank of England’s projected 11% in October. UK core CPI is also expected to rise to 6.2% in June, which would be the highest of the major economies (if this week’s forecasts are hit). Japanese core CPI is expected to rise slightly to 2.2%. The question is whether this persistent rise above 2% is enough to encourage the Bank of Japan to pivot from its perennially dovish positioning. 

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The flash Composite PMIs are all expected to continue to deteriorate, ever closer to stagnation (denoted by the 50 level). The Eurozone looks most at risk of a downside surprise below 50 this week.


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Market Reaction: 

  • There is plenty of major economic data to generate volatility this week. 
  • Any negative surprises in growth-related data would be negative for the respective currencies. 
  • Any upside surprises to inflation data will generate volatility and potentially currency support (although with the negative implications to the economy this cannot be assured)

Latin America

Thursday 21st July

Mexican Retail Sales


Sales are expected to grow by +0.2% MoM in May with YoY sales dropping to 3.3% (from 4.6% in April)

Friday 22nd July

Mexican 1st half-month inflation


Headline inflation at the mid-month stage is expected to increase to 7.39% in July (from 7.88% in June. However, core inflation is expected to fall to 7.03% (from 7.47%)

Brazilian mid-month CPI 


Headline CPI is expected to fall decisively to 11.18% (from 12.04%)

The focus will be on inflation again. Trends picked up again in June and the first half month data for July will give a strong indication of whether this will continue. Forecasts suggest that Mexican headline inflation is still rising, but core inflation is set to retreat by around -0.5%. In Brazil, July inflation is forecast to reduce by closer to -1%. This would be welcome news to the respective central banks which have continued to hike rates.

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Market Reaction

  • The falling commodity prices have played a big role in the underperformance of Lat Am currencies in recent weeks. If inflation begins to fall back then this may allow some respite for this weakness.

This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. INFINOX is not authorised to provide investment advice. No opinion given in the material constitutes a recommendation by INFINOX or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.