Forecasting the Coming Week: Fed rate cut bets and the ECB should rule the sentiment

In what was another dreadful week, the Greenback saw its downtrend gather further pace and drop to multi-week lows amidst the broad-based improvement in the risk-associated universe. The FX galaxy, in the meantime, continued to assess the likelihood of more than one interest rate cut by the Fed, while prudence remained intact over FX intervention by Japanese officials. Next week, the ECB should maintain its policy rate unchanged.

The US Dollar Index (DXY) met extra downside pressure and plummeted to five-week lows near the 104.00 zone, accompanied by a strong pullback in US yields. The NY Empire State Manufacturing Index kicks off the week on July 15, while Retail Sales, Business Inventories and the NAHB Housing Market Index are all expected on July 16. Mortgage Applications tracked by MBA, Building Permits, Housing Starts, Industrial Production and the Fed Beige Book will all be unveiled on July 17. The usual Initial Jobless Claims are due on July 18, along with the Philly Fed Manufacturing Index, the CB Leading Index and TIC Flows.

Finally, EUR/USD managed to revisit the 1.0900 yardstick, or multi-week tops, on the back of further weakness in the Greenback. An Eurogroup meeting starts the week on July 15, seconded by German Retail Sales and Industrial Production in the euro area. On July 16, the EcoFin meeting, along with the ECB Bank Lending Survey and the Economic Sentiment tracked by the ZEW survey in Germany and the euro bloc are all due. The final Inflation Rate in the euro area comes on July 17, prior to the ECB meeting and President Lagarde’s press conference on July 18.  Producer Prices in Germany and the Current Account results in the euro zone will close the docket on July 19.

GBP/USD rose to levels last seen a year ago and traded at shouting distance from the key 1.3000 threshold towards the end of the week. The UK Inflation Rate is due on July 17 ahead of the labour market report on July 18. The GfK Consumer Confidence gauge will be published on July 19 followed by Public Sector Net Borrowing and Retail Sales.

Another FX intervention dragged USD/JPY to the low-157.00s following recent peaks in levels just shy of the 162.00 mark. The Tertiary Industry Index is expected on July 16 prior to the Reuters Tankan Index on July 17. The Balance of Trade results and weekly Foreign Bond Investment figures all come on July 18, ahead of the Inflation Rate on July 19.

AUD/USD extended its march north further and flirted with the key 0.6800 barrier, advancing for the fifth consecutive week for the first time since the beginning of 2022. The Westpac Leading Index is due on July 17. Finally, the Australian labour market report will take centre stage on July 18.

Anticipating Economic Perspectives: Voices on the Horizon

• The Fed’s Powell and Daly are due to speak on July 15.
• The Fed’s Kugler speaks on July 16.
• The RBA’s Simon and the Fed’s Barkin and Waller speak on July 17.
• The Fed’s Logan speaks on July 18.
• The Fed’s Bowman, Williams, Daly and Bostic speak on July 19.

Central Banks: Upcoming Meetings to Shape Monetary Policies

• The Bank Indonesia (BI) meets on July 17.
• The ECB is expected to keep rates unchanged on July 18.