Two weeks ago it was the turn of Draghi and the European Central Bank who had to decide about monetary policy. Last week was the time of Janet Yellen and Federal Reserve who announced to maintain unchanged interest rates in the monetary policy meeting of 25-26 July. Reference rates remain at 1,25%.
Currency news last week: Dovish Draghi Cannot Get the Euro Off from the Podium
In the post-meeting report, given the absence of President Janet Yellen’s regular press conference, it is reported that US central bank is planning to start reducing the monetary policy stimulus “relatively soon”. It is unclear whether ‘relatively soon’ refers to ‘this autumn’ or ‘early next year’. The Fed also shows confidence in rising inflation close to the target set at 2%.
With the arrival of the autumn, the central bank will begin selling the bonds it has accumulated within its budget for a total of $4,5 trillion.
At the same time, according to analysts, it should happen the next rise in interest rates after the rise in June.
US GDP (preliminary) and Manufacturing and Services PMIs have also been published during the week.
Preliminary US GDP rose in the second quarter of 2017, and the figure for the previous survey showed an increase of 1,2%, which marks a + 2,6% that confirms the expectations.
Even manufacturing and service PMIs do not disappoint in July: manufacturing PMI went from 52,0 to 53,2 percent against a consensus of 52,1.
The PMI of services did not depart from the previous figure of 54,2. Analysts predicted a slight decline to 54,0 which did not happened. Markit’s composite PMI also improved from 53,9 to 54,2.
Same data were also published for the Eurozone, but they disappointed the market for the month of July.
The manufacturing PMI, which in the previous survey had recorded a 57,4, this time scored 56,8. Analysts predicted a downturn in the index, but only up to 57,2.The composite PMI, however, went from 56,3 to 55,8. Analysts had estimated a slight decline to 56,2. Lastly, the PMI of the services remained stable at 55,4 but still disappointed expectations of 55,5.
What has surprised instead in July for the Eurozone was the ‘sentiment on the economy’. The Economic Sentiment Indicator survey found a data that improved from 111,1 in June to 111,2 in July. Analysts predicted a drop to 110,8.
The market movers of the next week (31 July – 4 August) will be multiple on the Economic Calendar.
One of the most important events of the week will be the Bank of England meeting. Everyone is convinced that Mark Carney will not decide to change interest rates, so the focus of the markets will be all for the report on inflation and the positions taken by members of the central bank.
Among the most important market movers of the week are definitely those on inflation in Italy and the Eurozone that will allow us to figure out how much road we will still have to go to achieve the ECB target.
In the weekend, as usual, the market will wait for US Non Farm Payrolls.