hile no G10 currencies moved more than 1%, the general theme was modestly stronger antipodean currencies and weaker European ones.

This week will be all about the European Central Bank. Its July meeting on Thursday kicks off a critical series of major central bank meetings where markets expect to see either easing or some indication that looser policy is on the way. Some key macroeconomic information will be released in the meantime, including the flash PMIs of business activity in the Eurozone and the first estimate of second-quarter GDP growth in the US on Friday.

All in all, we expect markets to shake off the torpor of the last couple of weeks and will likely see some volatile moves in the latter half of the week.

GBP

Sterling moves will continue to be driven by political headlines this week. Boris Johnson is expected to win the Conservative leadership contest on Tuesday, but markets have fully priced this in and we expect little reaction from the Pound.

Economic data continues to confound expectations. Wages grew, as did retail sales, both above expectations. With no key data on the pipeline this week, politics will dominate trading in Sterling. We think that the impasse over Brexit is unlikely to be resolved without a general election, so any news in this direction could add to currency volatility.

EUR

There was little news of note on either the macroeconomic or policy fronts in the Eurozone last week. This will change this in the next few days. On Wednesday we’ll see the latest PMIs of business activity for July, the most important leading indicator on the state of the Eurozone economy. Markets are expecting little change, but we see scope for an upward surprise in the very depressed manufacturing reading.

The ECB meeting presents a similar opportunity. Markets are primed for very dovish communications and even a rate cut. We think that there is room for disappointment here, and expect the ECB to punt to the September meeting when more data will be available. If so, expect a fairly sharp rally in the common currency.

USD

Second tier economic data out of the US last week was mostly mixed. Attention was, however, focused on Federal Reserve officials speeches, which generally confirmed that a 25 bp cut is coming next week. With core inflation comfortably near or even above the Fed’s target, depending on the measure, and consistent job creation and real wage increases, we think that market expectations of another three cuts over the next twelve months are exaggerated. Friday’s advance report on second quarter growth should confirm our view, with growth above 2% in real terms and the price deflator at the Fed target of 2%.