Weekly Outlook, 18-22 July

ECB and Earnings!

While the EUR is threatening to drop and stay under one USD, This week European Central Bank will hold its monetary policy meeting on Thursday, just a few hours after BoJ's meeting. Besides these policy meetings, inflation numbers from the UK, Canada, and New Zealand also will be significant to follow. On the stock markets, this week we should follow the earnings more closely.

UK Labor market data- Tuesday (GBPUSD)

Employment change, Claimant Count Change, Average Earnings Index, and Unemployment Rate numbers will publish on Tuesday. Both average earnings and unemployment rate are expected to stay unchanged at 6.8% and 3.8%, respectively. With higher expected inflation, if labor data cannot meet the expectations, more pressure will be seen on the British Pound against its rivals.

UK inflation – Wednesday

In recent months with sharply increasing home energy bills, especially gas prices, we saw one of the highest inflation among developed economies in the UK. CPI increased by 9.1% in May, and BoE is expecting that the October energy price cap increase can even lift headline CPI inflation to above 11%. For June numbers, while we are waiting for the headline increasing to 9.2%, Core data is supposed to decrease slightly to 5.8% from 5.9% in May. Overall, expected data will put more pressure on UK stock markets.

Canada Inflation – Wednesday

CPI in May confirmed that the Canadian economy is also suffering from higher inflation, like other developed economies. These higher inflation numbers were the main reason for the 100 basis point interest rate increase by the Bank of Canada. For the June data, while the BoC expects inflation to remain around 8% for the next few months, Canada's headline CPI is expected to increase to 7.9% annually. Canadian Loonie has been under pressure in recent weeks with decreasing Oil prices, and with these estimated data, lower digits are waiting for it.

US Housing Data - Tuesday & Wednesday

The US Department of Commerce is due to publish the Housing Starts and Existing Home Sales numbers, respectively, on Tuesday and Wednesday. After slightly rise in April, overall housing starts, including Single-family and Multi-family, dropped by 14.4% in May. At the end of May, existing home sales increased 12.6% from the prior month but decreased by 4.1% on the annual scale. We expect another slight decrease for both numbers, which would be a negative sign for the US stock markets.

ECB meeting – Thursday

Finally, the wait will be over. The European Central Bank (ECB) is to kick off its rate hike cycle this Thursday to make a July monetary policy meeting a historic meeting with a 25 bps hike to -0.25%. And it is expected to see the same process in the next meetings, to increase the rates to 0.75% by year-end. If the ECB starts to increase the rates and repeat that in the following months, Euro will get some supports. However, it is not guaranteed to regain its previous position soon.

BoJ meeting – Thursday

Bank of Japan will hold its monetary policy meeting this Thursday with no change expected in its policies and rates. It is anticipated that BoJ to continue its ultra-accommodative monetary policies while other central banks increase their rates. This diversion in policies could lead to further falls in the Yen.

Earnings report.

After the first disappointing reports in the last two days of the previous week, this week more earnings are there to watch. Bank of America, Charles Schwab, Goldman Sachs, and IBM on Monday will report. J&J and Netflix on Tuesday will publish their earnings. Tesla and Biogen on Wednesday, AT&T, Philip Morris, American Airlines on Thursday, Verizon, NextEra Energy, and American Express on Friday are other important earnings of the week.