Next week, the Federal Reserve will start a quiet period before the FOMC rate meeting on July 30th. The European Central Bank is expected to keep interest rates steady, considering ongoing tariff issues, although rates are close to neutral.

Upcoming Economic Data Releases

The S&P Global flash manufacturing and services data for both Europe and the US will come out on Thursday. Last week, US initial jobless claims dropped to 221,000, moving back toward lower levels after a temporary rise toward 250,000. Key releases include New Zealand’s CPI on Sunday, expected to be 0.6%, down from 0.9%. On the same day, Japan will hold Upper House Elections. On Wednesday, eyes will be on the AUD as the RBA Governor delivers a speech. Thursday brings important data like the flash manufacturing and services PMIs for France, Germany, and the UK. The ECB will announce its interest rate decision, likely keeping it at 2.15%. In the US, unemployment claims are expected to rise to 229,000. On Friday, UK retail sales data is predicted to climb by 1.2% after a decline of 2.7%.

Federal Reserve Quiet Period and Market Implications

During the Federal Reserve’s quiet period, we believe market movements will rely heavily on incoming data, shaping expectations for the July 30th meeting. The recent drop in jobless claims to 221,000 suggests a strong labor market, potentially reducing the likelihood of a significant rate cut by the central bank. We expect the European Central Bank to maintain current rates, but their statement is likely to have a dovish tone. Recent reports, such as the ZEW Economic Sentiment survey for Germany falling to 49.6 in July, indicate waning confidence amid global trade tensions. Weak forecasts for flash manufacturing PMI in Germany and France further support the idea of future easing. The contrast between a robust US economy and a slowing European one will be a key theme in the coming weeks. The latest US Consumer Price Index showed inflation easing to 3.0% year-over-year in June, which alleviates some pressure, yet the US economy continues to outshine others. This leads us to favor US assets over European ones. Thursday will be critical with a flurry of manufacturing and services data before the ECB press conference. A significant gap between the expected US PMI figures (above 52) and the expected contraction in Europe could drive the dollar’s strength. Derivative traders might explore call options on the dollar index or put options on the EUR/USD pair. Historically, instances of policy divergence—like in 2014 when the ECB eased while the Fed tightened—have resulted in sustained dollar rallies. We’ll be closely watching Christine Lagarde’s press conference for any hints that align with this past behavior. Any strong indications of future rate cuts in Europe could spark a similar trend. In addition to the major economies, we’ll pay attention to the inflation report from New Zealand and watch for policy hints from Governor Bullock in Australia. The election outcome in Japan could also lead to short-term volatility in yen-denominated assets. These events could present trading opportunities alongside a core long-dollar strategy. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now