The European Central Bank will hold its first monetary policy meeting next week since the UK’s decision to exit the European Union. The UK will stay under the spotlight though as key economic indicators for the British economy are released.

The US and Japan will have a quieter seven days, with the latter closed on Monday for a national holiday.

New Zealand CPI to pick-up slightly

CPI data out of New Zealand will start the week on Monday. Inflation has been stuck near zero levels since 2015, prompting a series of interest rate cuts by the Reserve Bank of New Zealand. CPI is expected to edge up from 0.4% y/y in the first quarter to 0.5% y/y in the second quarter. Markets had priced in at least one more cut by the RBNZ this year until the central bank issued a warning on the overheating housing market in early July, dampening expectations of further easing.

However, an announcement by the RBNZ that it will make an unscheduled update of its economic assessment on July 21 has once again raised expectations that the central bank will cut its official cash rate in August. The speculation has reversed some of the New Zealand dollar’s recent gains as it has slid from above 0.73 to below 0.71.

ECB to hold first post-Brexit meeting

Next week’s ECB meeting will be high on investors’ agenda but before that, there is the latest German ZEW business survey data on Tuesday. The ZEW economic sentiment index for Germany is forecast to deteriorate sharply in July from 19.2 to 9.1 as the Brexit shock hits business confidence not just in the UK but across the continent as well.

The current conditions index is also forecast to decline, from 54.5 to 52. More survey data will follow on Friday with the release of the latest Markit flash PMI data for the Eurozone. The flash Eurozone composite PMI is expected to fall from 53.1 to 52.6 in July with both the manufacturing and services components seeing a deterioration.

The ECB will on Thursday conclude its two-day policy meeting where no new action is expected from the central bank. However, ECB President Mario Draghi’s words will be carefully watched in his press conference over any possible hints of further stimulus and on how big an impact the Brexit fallout is expected to have on the Eurozone economy.

The Brexit vote has already highlighted the weakness in the Eurozone banking sector, particularly in Italy where many banks are overburdened by excessive non-performing loan ratios. Like the pound, the euro has come under pressure against the dollar and the yen since the referendum, though to a much lesser extent.

UK retail sales could take a hit from Brexit

It will be an important week for UK data over the coming seven days as retail sales, inflation and unemployment figures are all due in the same week. The June inflation data out on Tuesday are forecast to show annual CPI edging up from 0.3% to 0.4%.

The core rate is also seen to be ticking higher from 1.2% in May to 1.3% in June. On Wednesday, the unemployment rate is forecast to stay unchanged at 5% in May but average weekly earnings growth is expected to accelerate from 2% to 2.3% in the three months to May.

But what could be a potential warning sign for the UK economy, retail sales are expected to decline in June as British consumers are thought to have slowed down on their purchases both before and after the referendum. Retail sales are forecast to contract by 0.6% m/m in June, with the 12-month rate easing from 6% to 4.9%.

The Bank of England this week held off from cutting rates as it devises the exact size and nature of its stimulus measures. A weaker reading could influence the BoE’s decision.

Housing data in focus in a light calendar week for the US

As the US economic calendar clears up ahead of the FOMC meeting on July 26-27, housing data will be the dominant data in the coming week. Building permits and housing starts out on Tuesday are forecast to increase slightly in June, but existing home sales out on Thursday are expected to see a small dip.

Also to watch are the Philadelphia Fed manufacturing index on Thursday and the Markit manufacturing PMI on Friday.

With the dollar already boosted this week from strong retail sales and industrial output data, further encouraging signs from the housing market and from business surveys will likely add to the rising sentiment for the greenback.