Weekly Forex Fundamental Outlook

This week the European Central Bank’s policy meeting will be closely watched as investors wait to see what steps Mario Draghi may take to support the euro area economy.

The week will also bring fresh insights into the global economic outlook, with manufacturing data for Japan, the euro zone and the U.S., due Wednesday. The calendar will also feature a first look at how the U.S. economy performed in the second quarter.

In the UK, a new prime minister should be in place by the end of the week, as concerns over the prospect of a no-deal Brexit continue to build.

The U.S. dollar rose on Friday as fears of a larger-than-expected 50-basis-point interest rate cut in July abated after the New York Federal Reserve walked back dovish comments from its president the prior day.

At a conference on Thursday, New York Fed President John Williams argued for pre-emptive measures to avoid having to deal with too-low inflation and interest rates.

The dollar dropped before rebounding after a New York Fed representative subsequently said Williams’ comments were not about immediate policy direction.

The euro fell against the rebounding dollar on Friday as investors ramped up bets for a European Central Bank interest rate cut.

Not all analysts were convinced. Marvin Loh, senior global macro strategist at State Street Global Markets, said he believed the ECB would wait to cut rates until the Fed had done so. What’s more, he noted, the bank may wait on making any significant changes in policy until incoming ECB chief Christine Lagarde has been installed.

The euro was 0.47% lower at 1.122.

The British pound hovered around 1.25 on Friday after its biggest daily jump in more than two months in the previous session, though traders were still focused on the growing risks of a no-deal Brexit.

Investors had dumped the pound earlier this week, sending sterling to a 27-month low against the dollar and a six-month low versus the euro, before recovering some of those losses on Thursday.

Tuesday, July 23

U.S. Existing Home Sales (Jun)

Wednesday, July 24

Japan Manufacturing PMI (Jul)

Euro Zone Manufacturing PMI (Jul)

US Manufacturing PMI (Jul)

U.S. Services PMI (Jul)

U.S. New Home Sales (Jun)

Thursday, July 25

U.S. Durable Goods Orders (Jun)

U.S. Trade Balance (Jun)

U.S. Initial Jobless Claims

German Ifo Business Climate

ECB rate setting meeting

Friday, July 26

U.S. advance GDP

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