Week Ahead

Developed Markets

ECB post-Brexit. The European Central Bank meets for the first time post-Brexit this Thursday. The Bank is less likely to ease policy now that immediate Brexit shocks have subsided, and the Bank of England refrained from cutting rates last week. Flash Eurozone PMI readings — reflecting the potential effects of Brexit on business sentiment – are due on Friday.

U.K. economic indicators. Several U.K. economic indicators, including producer prices and retail sales for June, are due early this week. These indicators may reflect the nascent effects of Brexit on U.K. consumers. If these readings are markedly poor, the pound could fall further against the dollar.

Preliminary U.S. PMI. With muted chances of Fed rate normalization, positive U.S. data releases this month — including strong payrolls and corporate earnings — have supported market sentiment. Flash Manufacturing PMIs for July could perpetuate this rally on Friday. June’s reading surprised to the upside after falling in May.

Emerging Markets

Lira volatility. Following an unsuccessful military coup against President Recep Tayyip Erdogan on Friday, the Turkish lira fell its largest amount in nearly eight years. The currency is likely to recover from its short-term plunge this week, but remains highly vulnerable as Erdogan’s government cracks down on dissenters.

Cautious Copom. The Central Bank of Brazil (Copom) has few options at its Wednesday meeting. Although an easier Fed — and therefore a weaker dollar — has caused the real to relatively strengthen, currency weakness is still prompting inflation. From May, inflation fell 0.35% to 8.84% in June, but remains nearly twice Copom’s target. President Dilma Rousseff remains suspended amid corruption charges, leaving the real especially exposed to depreciation.