As we enter the final stretch of July, global financial markets are gearing up for a consequential week marked by political developments, central bank activity, and key economic data releases. Investors and policymakers alike will be watching closely as events unfold across Japan, Australia, Europe, and the U.S., shaping sentiment and influencing monetary and fiscal expectations for the months ahead. Here’s what to monitor:
Japan: Political Shockwaves and Market Reactions
Japan’s political landscape is in flux following preliminary results from the Upper House election, which indicate a major blow for the ruling Liberal Democratic Party (LDP) and its coalition partner Komeito. Together, they are projected to secure just over 40 of the 125 contested seats—far short of the 50 needed for a majority.
This outcome introduces a new wave of political uncertainty. The bond and currency markets had already begun to price in this possibility, but with the prospect of looser fiscal policy under alternative leadership, volatility may persist. Japanese Government Bonds (JGBs) could see further bear-steepening, and the yen may come under renewed pressure. Analysts warn that should fiscally expansive parties gain traction, USD/JPY could breach the psychologically significant 150 mark.
Adding to the political backdrop, Prime Minister Shigeru Ishiba is set to meet with high-level delegations from the European Union and China in Tokyo on July 23 and 24, potentially laying groundwork for broader diplomatic and economic realignments.
Australia: Clarity Sought in RBA Minutes
Tuesday will bring a closely watched release from the Reserve Bank of Australia (RBA): the minutes from its July policy meeting. With the board surprisingly split 6–3 on the decision, market watchers are eager for more insight into the central bank’s internal debate.
While RBA Governor Michele Bullock provided a detailed account in her post-meeting press conference, the minutes may offer deeper context on the dissenting voices and whether a more hawkish or dovish tilt is emerging among the majority. This could influence expectations for future rate moves and the Australian dollar’s trajectory.
Europe: Lending Trends and PMI Insights
Tuesday also sees the release of the European Central Bank’s Q2 Bank Lending Survey. Expectations are for a continued rise in loan demand and a further loosening of credit standards. This would align with the ECB’s recent rate cuts and could bolster the case for more easing later this year.
Thursday brings preliminary July Purchasing Managers’ Index (PMI) figures for the Eurozone and the UK. In the Eurozone, forecasts point to a slight improvement in the composite PMI to 51.2, the highest in over a year. However, uncertainties loom. Recent business sentiment surveys were conducted before former President Trump’s renewed tariff threats on EU goods. If PMIs capture forward-looking sentiment, as they often do, the data could underwhelm.
The UK’s flash PMI is also expected to suggest moderate expansion, with a projected reading of 51.8. While the services sector continues to lead the recovery, manufacturing remains under pressure. Economic momentum at the start of Q3 will be closely scrutinized in the context of recent better-than-expected growth in Q1.
Türkiye: A Cautious First Step in Easing Cycle
On Thursday, the Central Bank of Türkiye is widely anticipated to kick off its monetary easing cycle with a 250 basis point cut, bringing the benchmark rate down to 43.5% from 46%.
The move would follow recent tax changes that have lowered returns on local currency deposits—a signal that authorities are preparing the ground for a measured reduction in rates. Any hint at the pace of future cuts will be key, especially if inflation trends continue to improve.
European Central Bank: All Eyes on September
Also on Thursday, the ECB announces its latest interest rate decision. Expectations are firmly in favor of holding the deposit facility rate steady at 2.0%. The central bank is unlikely to offer concrete guidance, instead choosing to wait for more data and the September forecast update before considering further moves.
With varying views within the Governing Council, the strategy for now appears to be patience—keeping all options open while observing how inflation and global trade dynamics evolve, especially in light of renewed geopolitical tensions.
United Kingdom: Rebound in Retail Sales?
Friday’s highlight will be UK retail sales data for June. Following a sharp -2.7% month-on-month decline in May, analysts expect a meaningful rebound. Forecasts range from a 1.1% to a 1.8% increase, with strong seasonal factors and improving survey data supporting the view of a consumer spending recovery. If confirmed, this would be a positive signal for Q2 GDP and potentially influence the Bank of England’s monetary stance.
Germany: Business Confidence on the Rise
Germany’s Ifo Business Climate Index is also due Friday and is forecast to rise for the seventh consecutive month. The expected increase to 89.4, up from 88.4, would underscore growing optimism among German firms despite ongoing trade threats from the U.S.
The forward-looking expectations component is particularly relevant here, and any weakness could reflect corporate concerns about external risks like tariffs, even if actual output remains stable.
United States: Durable Goods Orders Show Reversal
Across the Atlantic, attention on Friday turns to U.S. durable goods orders for June. After a surprising 16.4% surge in May, a steep drop of around 10% is anticipated. This normalization, largely due to fluctuations in aircraft orders, is unlikely to signal underlying weakness. In fact, ongoing international demand for planes could sustain elevated order levels in the months ahead, supporting GDP via export channels.
Additionally, with the Federal Reserve’s policy meeting set for July 29–30, U.S. central bank officials enter their pre-meeting blackout period on Monday. This effectively silences commentary until after the decision, placing extra weight on market data and press speculation for clues about the Fed’s next move.
The coming week offers a rich tapestry of developments across politics, central banking, and macroeconomic data. From Tokyo to Frankfurt, Sydney to Washington, decision-makers will be navigating a landscape defined by uncertainty, opportunity, and evolving risks. Market participants should prepare for potential volatility and remain alert to shifts in both policy tone and economic momentum
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