Breakthrough in Color Combinations? 🎶 Our Platform 🎵

The economic landscape is shaping up as central banks prepare to make key decisions in the coming months. The US Federal Reserve and the European Central Bank (ECB) are expected to take significant steps that could impact global markets.

Investors are bracing for relatively little new from Fed Chair Jerome Powell's speech at the central banker meeting in Jackson Hole, as the US Federal Reserve has delayed its decision on the start of tapering, or the exit from bond purchases, due to uncertainty over the spread of the Delta variant until November. This delay has buoyed sentiment for risk assets.

Across the Atlantic, the ECB may reduce PEPP purchases after its meeting in September. The underlying trend in economic data remains stable, with a supply shortage meeting increased demand, which could potentially drive up prices in the near future. However, the disruptions in corporate outlooks and uncertainties related to Covid-19, as well as bottlenecks in supply chains impacting production, are contributing to the weakness in recent economic data.

The robust economic indicators across the Eurozone suggest stability in the region's economy. European fiscal policy, with its supportive measures spanning the entire Eurozone, will boost growth prospects in the coming quarters. However, it is unclear if the ECB will extend the PEPP or announce further asset purchase programs in September. Hawks on the ECB council are unlikely to extend the PEPP or announce further asset purchase programs in September.

The steepening of the yield curve indicates a rise in longer-term interest rates relative to shorter-term rates. This could be a response to the US Federal Reserve's decision to delay tapering, as well as the potential slight slowdown in European monetary policy suggested by the ECB leadership's comments.

Looking ahead, the end-of-year outlook for the Eurozone economy remains optimistic, with the central bank chief expected to possibly reduce PEPP purchases at the ECB meeting in September being Christine Lagarde, the President of the ECB. The robust economic indicators across the Eurozone, combined with European fiscal policy, could set the stage for a strong finish to the year.