Market focus will be on the development in Ukraine with particular attention tohow Russia’s unilateral humanitarian aid convoy to Ukraine is handled, see FinancialTimes.
In the euro area GDP figures for Q2 are released and we expect that the recoveryhas lost a bit of momentum. Yesterday’s industrial production figures showed adecline for a second month in a row and we revised our GDP forecast down to 0.1%q/q from 0.2% q/q. Having said that, retail sales have increased during Q2 suggestingthat private consumption continues to increase at a faster pace. This also reflects thatdomestic demand in Europe is still doing well. Note that the German, French andPortuguese figures are released ahead of the euro-area aggregate. For more onPortugal see our research paper published yesterday.
The ECB publishes its monthly report, which includes the Survey of ProfessionalForecasters where focus will mainly be on the longer-term inflation expectations.Since the latest survey was conducted inflation has been around 0.5% and thepersistent low inflation could lead to a decline in inflation expectations. However,given that Draghi sounded balanced last week, when he knew the result, we do notexpect a decline below 1.8% for the longer-term inflation expectations.
In the US the weekly claims data also deserve some attention. Currently initialunemployment claims are below 300k, suggesting that the labour market remains verystrong.
Read the full report: FX Daily