• UK July PMI data signal sharp economic slowdown The British pound came under renewed selling interest on Friday, following Markit’s one-off release of Britain’s preliminary manufacturing and services PMIs for July. Both indices plunged by much more than expected, falling below the critical 50 mark that separates expansion from contraction. The surveys suggested that the UK economy likely contracted in the direct aftermath of the referendum, as businesses experienced a very sharp drop in new orders. We believe that the softness in the UK economy is likely to be reflected by official post-referendum data as well over the coming weeks, something that could heighten speculation of a potential UK recession being on the horizon. We therefore expect the combination of weak economic data and expectations for aggressive easing by the BoE in August to keep the pound under selling interest in the near-term.

• G20 pledge to encourage growth in “Brexit” aftermath Over the weekend, the finance ministers and central bank governors of the G20 economies pledged to use all available instruments in order to promote global growth and to offset any potential consequences arising from the UK referendum. The overall message from the officials was the need to reduce global uncertainty and to place more emphasis on fiscal and structural policies to support growth. The discussion on monetary policy was limited and most of the comments from the G20 officials were largely reiterations from previous G20 gatherings, something that kept the impact in FX markets limited.

• Today’s highlights: During the European day, we get the German Ifo survey for July. Both the current conditions and the expectations indices are expected to have declined. We believe that the outcome of the UK referendum is likely to have weighed on German business sentiment, as the future of the EU-UK trading partnership remains uncertain. The forecast is also supported by the German ZEW survey which showed that optimism among German economists deteriorated notably during the month. The ZEW expectations index plunged, pointing that most economists and analysts expect economic conditions to worsen over the next six months. We expect the Ifo expectations print to show a similar view by German businesses, something that could bring the euro under selling interest.

• As for the rest of the week, on Tuesday, we have no major events or indicators scheduled.

• On Wednesday, the highlight will be the FOMC policy meeting. The Committee is almost certain to keep Fed fund rates unchanged at this meeting, but we expect the statement to reflect a more hawkish bias than the one in June. From Australia, we get CPI data for Q2. In our view, these data are likely to be the biggest determinant of whether the RBA will ease its policy further in coming months. In the UK, the 1st estimate of Q2 GDP is coming out.

• On Thursday, Germany’s preliminary CPI for July is coming out one day ahead of Eurozone’s preliminary inflation rate.

• On Friday, during the Asian morning, we get the usual end-of-month data dump from Japan, but investors gaze will be fixed on the BoJ monetary policy meeting. We believe that Japanese policymakers are very likely to ease policy at this meeting, especially after the success of Prime Minister Abe’s coalition in the nation’s upper house elections and the further slide of Japan’s inflation rate into the negative territory. Eurozone’s preliminary CPI for July is also due out. From the US, we have the 1st estimate of Q2 GDP. Finally, the European Banking Authority will release the results of its latest stress test.