Commentary: Fed, ECB, and major earnings
While economic calendar was relatively light in past week, this week will deliver numerous important news. Firstly, both the US Fed and European Central Banks will make interest rate decisions. Markets are pricing in a 98% probability of another 25bps hike which will lift the base rate to 5.25-5.50% range. Importantly, this is widely expected to mark the end of the hiking cycle and the Fed rate should start falling by a steady pace. This view is supported by the fact that the US inflation has moderated considerably. Another positive note for markets is that the US economic activity has proven highly resilient in 1H23. Labor market and retail sales have displayed strength (despite July’s downwards surprise) and this should once again be proven by 2Q23 GDP and durable goods orders data due Thursday this week.
Meanwhile, the ECB is also expected to hike by 25bps, lifting the rate to 4.25%. The week ahead will also deliver earnings from a large number of major US companies from the sectors of technology, financials, health care, and communications.
