For the economic calendar, last week was the calm before the storm of this week. There is a deluge of data from the US, with the Federal Reserve (Fed) monetary policy meeting on Wednesday just one of several key announcements. There are also key releases on consumer confidence, growth, and inflation to also keep traders on their toes throughout the week. However, away from the US, we need to be on the lookout for Eurozone data on growth and inflation, along with what could also be a crucial inflation figure for Australia. There is barely time for traders to draw breath.

  • Wednesday’s Fed meeting is all about the hints of what might be about to come on tapering.
  • US growth (Thu) and the Fed’s preferred inflation metric (Fri) will also be watched
  • Eurozone Q2 growth and flash inflation in focus on Friday
  • Will Australian inflation put pressure on the RBA for a more hawkish positioning?

Not expecting too much from the Fed

In his recent Congressional testimonies, Fed chair Powell tried to pour cold water on the enthusiasm around tightening monetary policy. He has concerns over the 6 million fewer labor force since the pandemic began, and continued to insist that high inflation remains “transitory”. We expect the July FOMC meeting to continue this trend.

The issue for this Fed meeting will still be centred around when tapering of the Fed’s $120bn monthly asset purchases will begin. However, the most that markets can expect will be veiled hints, and there is unlikely to be any of those. Moving into the summer holiday’s expect Powell to play everything very straight and without giving much away. We continue to believe that Jackon Hole (end of August) will be the first real signal of the taper to come.

There are no economic projections or dot plots in this meeting. There is just a statement and Powell’s press conference to go by.

Impact: USD has been supported coming into the meeting, albeit with easing buying pressure. There is little reason for this to change, although whether USD can regain the positive drive remains to be seen.

Growth and core PCE 

Aside from the Fed meeting, traders will also be on the lookout for:

  • Durable Goods
  • Consumer Confidence
  • Advance GDP
  • Pending Home Sales
  • Core Personal Consumption Expenditure. 

Consumer Confidence is already back around pre-pandemic levels but is expected to slip back slightly. Anything under 120 would raise a few eyebrows. 

After a big Q1 growth reading of +6.4%, on Thursday we get a first look at Q2 growth with Advance GDP. The renown GDP casting tool from the Atlanta Fed, GDPNow has been slipping back for a few weeks now and is expecting +7.6%. The consensus estimate is running higher at +8.5% annualised, whilst some, such as ING see Q1 GDP up at +9.5%. 

Growth forecasts seem to be rather varied this quarter, with the impact of supply bottlenecks proving a quandary for analysts. With such a wide range of forecasts, the impact of the data could be fairly volatile. 

The Fed’s preferred inflation gauge, the Core PCE is on Friday. Once more, supply restrictions are elevating inflationary forces and this continues to pull inflation way above the Fed’s 2% target. Monthly growth of +0.6%/+0.7% would pull the year-on-year data close to 4%. We will have another market assessment of whether the Fed truly does believe that inflation is transitory.

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Eurozone GDP and inflation 

The expectation is that Eurozone inflation could touch a shade above 2% this week. However, in this age of high inflationary forces, this is not an exception number (when US inflation is running almost double that). This will not be putting any pressure on the ECB to act and the market is likely to remain downbeat on EUR as a result.

Eurozone Prelim GDP is expected to climb by +1.5% for Q2, dragging the region out of technical recession. The Eurozone is lagging the US on its economic rebound as the exit from pandemic lockdown was much later. Any reasonably sized upside surprise would help to support EUR though. 

Australian inflation 

The Reserve Bank of Australia is lagging somewhat behind the RBNZ and BoC when it comes to tightening. Higher than expected inflation could begin to recalibrate expectations.

Quarterly inflation came in lower than expected in Q1, however, this is a rare occurrence. In each of the previous five quarters, inflation has been higher than forecast. Consensus is going for +0.7%, and a higher than expected reading would certainly have a supportive impact on AUD.


The Fed is crucial this week but there may not be much that we learn from Powell. There could be volatility from US GDP and PCE inflation, whilst the moves could also come from EUR and AUD on any positive surprises in inflation.