Danske Bank analysts suggest that today's key event will be the ECB meeting as with economic data remaining lacklustre, the case for additional stimulus has strengthened.
“In a first step, we expect the Governing Council today to adjust the forward guidance to signal the possibility of lower policy rates in the future. This should set the scene for a comprehensive easing package to be unveiled at the September meeting. Markets continue to price in a c.40% probability of a 10bp cut at the July meeting and might hence be disappointed by the lack of action. However, we expect any sell-off to be short-lived as focus quickly reverts to the September meeting.”
“Earlier in the day, the German Ifo figures for July are due out and markets will monitor whether they bear the same dire message as yesterday's PMIs. Both the PMI and ZEW surveys point to more weakness to come for Ifo expectations.”
“As the US reporting season continues, markets will keep an eye on June durable goods orders for signs of weakness in the capex cycle ahead of tomorrow's Q2 GDP print.”
“Pedro Sanchez faces a second vote in parliament over his reappointment as PM. If he falls short of a simple majority, Spain is heading for its fourth election in as many years.”
“In the emerging markets space, focus reverts to Turkey. The muted reaction of the TRY to Erdogan's dismissal of central bank governor Cetinkaya and the U-turn by global central banks should allow the Turkish central bank to ease policy today without triggering a major sell-off in the TRY in our view.”
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