Key events in developed markets next week

We are building up to the 28 July Federal Reserve meeting, but Chair Jerome Powell has clearly indicated that there is not going to be any movement in the central bank’s position. He suggested we are still some way off from seeing the winding down of the vast stimulus measures implemented over the past 16 months, but with the economy booming and inflation well above target, we continue to expect a tapering of QE to start this year. We also expect the Fed to follow the lead of the Reserve Bank of New Zealand and Bank of Canada in raising interest rates next year.

We are now entering the Fed’s “quiet period” where senior officials avoid talking about the monetary policy outlook, while the data calendar is relatively thin so we are not expecting major market moves to be driven from the US macro newsflow over the coming week. Nonetheless, it still paints a positive picture of US economic prospects with housing activity picking up after a recent quiet patch with a lack of housing supply continuing to support house price growth.

Next week's ECB meeting should shed more light on whether the new strategy is just window-dressing and a formalisation of the well-known monetary policy stance or actually a shift towards more dovishness and even more determined monetary policy easing to achieve what the ECB hasn't achieved for a decade: inflation back to target.

Survey indicators will also give a sense of what is happening to economic sentiment at the moment. June figures were just shy of euphoric and the question is whether the extremely positive outlook on the economy has been maintained despite the Delta variant taking hold in the eurozone, restrictive measures being reinstated and supply side problems continuing for manufacturing.