GDP is expected to show a decent growth rate of 0.7% q/q

Market Movers

We are probably in for a relatively quiet day as we await the FOMC meeting tomorrow. We expect the Fedâ€™s rhetoric to turn more hawkish in its statement tomorrow and we still expect the first rate hike in September â€“ a call for which financial markets currently price a roughly 50% probability.
In the US, the Markit services PMI is expected to show signs of stabilisation in July following a steady decline in the past three months. Consensus expects the index to increase slightly to 55.0 in July from 54.8 in June.
In the UK, the preliminary release of Q2 GDP is expected to show a decent growth rate of 0.7% q/q and 2.6% y/y following a 0.4% q/q increase in Q1. Tonight, the Bank of Englandâ€™s Deputy Governor, Cunliffe, speaks in London. The text will be released and his comments will be scrutinised for indications of a possible rate hike later this year, particularly after the minutes from the July meeting showed that more members now tilt towards a rate hike (see Flash Comment UK: More MPC members tilttowards a hike for details).
We expect yet another solid reading for retail sales in Sweden in June, estimating a yearly increase of 4.0%.

Selected Market News

Risk assets sold off yesterday across the board amid concern over Chinaâ€™s economy and as Chinese stocks continue to fall. European stocks posted their biggest five-day drop this year, while yields on 10Y German and US government bonds declined slightly.
The euro gained substantially on yesterdayâ€™s risk-off move and EUR/USD rose above the 1.11 level. Yesterdayâ€™s gains underlined the euroâ€™s status as a preferred funding currency and could remain supported by weak risk appetite.

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