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[Quick Facts]

1. There are higher expectations for the ECB to "skip" a rate hike in September.

2. The euro area economy slows.

3. Trump leads with 54% support in a U.S. election poll, 37 points ahead of DeSantis.

4. OPEC oil outputs fell to a two-year low in July., mainly due to Saudi Arabia's additional production cuts.

[News Details]

There are higher expectations for the ECB to "skip" a rate hike in September

The preliminary July HICP y/y in the euro area stood at 5.3%, compared to the expected 5.3% and the previous reading of 5.5%; the preliminary core HICP y/y came in at 5.5%, compared with the expected 5.4% and the previous figure of 5.5%. While headline inflation continues to fall, core inflation remains flat after two straight months of declines that have so far failed to sustain.

Prices in services once again outperformed, accelerating to up 5.6% y/y in July from 5.4% in June, likely reflecting higher nominal wages and a greater desire to spend on travel and recreation after the COVID-19 outbreak.

Stubborn inflation in the service sector, coupled with an acceleration in food prices, which rose by an alarming 9.2%, is likely to heighten the misgivings of the ECB hawks who are concerned that the trend of price growth has become entrenched.

Overall, excessive inflation is now coming down only slowly. The effects of ECB rate hikes are still difficult to be assessed due to the lag. After the release of the data, the market has higher expectations for the European Central Bank to skip a rate hike in September. If the economic indicators in August continue to be weak, they will increase this probability. On the contrary, the ECB is likely to continue to raise interest rates.

The euro area economy slows

The preliminary Q2 GDP in the euro area increased by 0.6% y/y, higher than the market expectations of 0.5% and lower than the previous value of 1.1%. Germany, Europe's economic powerhouse, suffered a weak second quarter, with its GDP flat q/q, while Europe's second-largest economy France grew slightly in Q2 at 0.5% y/y boosted by a surge in exports.

The recent deteriorating economic outlook in the euro area was largely due to weak demand, said Christine Lagarde at the press conference for the rate decision. Considering the GDP and HICP performance in the euro area, the likelihood of a pause in rate hikes in September has increased, in part due to slower growth and signs of a temporary cooling in underlying inflation.

Trump leads with 54% support in a U.S. election poll, 37 points ahead of DeSantis

The New York Times and Siena College on July 31 released the results of a joint poll of Republican voters, showing that among all the Republican presidential candidates, Donald Trump took the absolute lead with 54% support, 37 points ahead of Ron DeSantis, and the rest of the candidates' support did not exceed 3%, according to The New York Times. The survey shows that as Republican voters' concerns about Trump's "confidential document event" fade, Trump has gained absolute support across voters' age groups, gender, region, party affiliation, and education level.

OPEC oil outputs fell to a two-year low in July., mainly due to Saudi Arabia's additional production cuts

Oil production by the Organization of the Petroleum Exporting Countries (OPEC) fell in July as Saudi Arabia made additional voluntary output cuts as part of the OPEC+ group's latest deal to support the market and the suspension of exports at a Nigerian port constrained supplies, a survey showed on Monday. OPEC+ is an alliance of oil producers formed by OPEC and its allies, including Russia.

OPEC produced 27.34 million barrels per day of oil in July, down 840,000 bpd from June, the survey found. It was the lowest level since September 2021, according to the Reuters survey.

Saudi Arabia had pledged to cut production by 1 million bpd in July as part of the OPEC+ deal reached in June to extend production curbs until 2024. Oil prices began to surge as a result, with Brent crude futures rising above $85 a barrel from near $71 at the end of June.

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