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Week Ahead (2/2)

UK
  • Friday will see the release of July activity data. Consensus is looking for a 0.5%M/M print (which would be the slowest pace of growth since the lockdown-induced contraction in January). Industrial production and construction are both expected to pare about half of June's losses while the service sector is expected to slow to 0.6%M/M (from 1.5% in June). The market will pay attention to the data but will likely be looking to next week's inflation and labour market data for more conviction.
  • Political events will also be closely monitored with the media widely reporting that an increase in national insurance contributions (effectively an income/payroll tax) will be used to pay for a reform of social care alongside an end to the pensions triple lock (which links pension increases to the higher of 2.5%, average earnings or inflation). These decisions are politically controversial as the Conservative manifesto included pledges to keep national insurance at its current rate and to maintain the pensions triple lock.
  • Outside of the domestic matters, the ECB meeting will be closely watched this week and is likely to drive general market sentiment towards the end of the week.

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