Economic calendar: Prepare for the Big Thursday

Summary:

• UK manufacturing production expected to deteriorate a little in July

• BoE and ECB unlikely to make monetary move this week

• CBRT will have a chance to save lira on Thursday

As it is usually the case for Mondays the economic calendar is rather empty today. The UK data pack for July scheduled at 9:30 am BST is the sole event worth watching today. Industrial production production is expected to remain in tact at 1.1% YoY while the manufacturing gauge should slide from 1.5% YoY in June to 1.4% YoY in July. Trade deficit is expected to deepen to 11.8 billion GBP. Apart from that, Fed member Bostic will discuss economic outlook at 5:00 pm BST.

What to watch for the remainder of the week?

This is really tense time on the markets. Emerging market crisis plus Trade Wars with China have already sent shockwaves through currencies and spoiled moods on equities. Now the question is: what will central bank do about it? We shall know by Thursday.  

CBRT decision on rates (Thursday, 12:00pm BST)

This really wasn’t necessary. After an emergency hike in May Turkey had tools to fight the crisis. All investors wanted was a sense of rationality from Erdogan. He chose the different way and now the plunge in lira and a resulting spike in inflation requires another leap in interest rates. The consensus sees a jump of 325 basis points for the main rate that is already at a steep level of 17.75%. This might already be tough to swallow for Erdogan and even if the hike is delivered it mustn't end the turmoil as higher rates will do nothing to improve the relations with the US. But without this hike the lira might quickly find itself on the selling block, pulling other EM currencies along. Affected markets: USDTRY, USDZAR.

The ECB decision (Thursday, decision 12:45pm BST, conference 1:30pm BST)

The ECB has the comfort the CRBT has not: of doing nothing. And it will do exactly this. However, the meeting might still count for the European markets as the EURUSD is a bit stuck and might use any impulse from Draghi during the post meeting conference. Remember, the ECB is on track to phase out the QE at the end of the year and investors will want to confirm that. Affected markets: EURUSD, DE30.

The Bank of England decision (Thursday, 12:00pm BST)

The Bank of England raised rates the last time around but a soft statement actually brought the pound lower. Frankly speaking the Brexit negotiations have a much bigger impact on the GBP now that deadlines are around the corner. Having said that, a deal could pave the way for more interest rate increases so it will be interesting to hear if the BoE confirms such outlook. Affected markets: GBPUSD, UK100.

EURGBP managed to break above from the recent trading range (0.8700-0.8950). The pair pulled back after touching the 0.9100 handle. Data from the UK scheduled for today as well as central bank meetings later this week may result in a fresh price impulse. Source: xStation5