EUROZONE DATA: Week Ahead: BLS, PMIs and ECB Decision

TUESDAY - ECB Q2 Bank Lending Survey

The ECB's Q2 Bank Lending Survey will provide an important update on credit demand and lending standards across the region. It is a closely watched survey by ECB Governing Council members. In a recent hawkish interview, Executive Board member Schnabel referenced the Q1 survey's results as rationale for her view that policy is becoming accommodative (even if her view is considered a minority amongst the rest of the Board). It will be interesting to see if the BLS echoes the broad strokes of more regular and timely lending data. After displaying signs of plateauing through the first four months of 2025, the  Eurozone credit impulse metric of 3mth flows vs 3mths a year ago fell four tenths to 1.5% of GDP in May, the lowest since December. While 200bps of ECB rate cuts have clearly contributed to a recovery in credit growth since Q1 2024, this support now appears to be being countered by persistently elevated trade policy uncertainty.

THURSDAY - July Flash PMIs

Thursday's flash PMIs will as always be a closely watched data point, but will likely come too late to meaningfully influence outcomes at the ECB decision later that day. Current consensus pencils in another incremental improvement in the Eurozone composite PMI to 50.8, from 50.6 in June. Both services and manufacturing components are expected to rise, but the latter is still seen below the neutral 50 handle (cons 49.8 vs 49.5 prior). The composite PMI is expected to rise in both Germany and France, though the latter is still seen in contractionary territory.  

THURSDAY - ECB Decision

The ECB is expected to hold its policy rate at 2.00% on Thursday, after President Lagarde emphasised that policy was in a "good place" at the June decision. Major deviations from existing policy statement guidance (signalling a “data dependent and meeting by meeting approach”) are also unlikely. Economic data since June has generally confirmed the ECB's outlook, but tariff uncertainty has once again ratcheted higher after President Trump's latest threat of a 30% reciprocal rate from August 1. Market pricing remains consistent with one more 25bp cut this cycle, which is in line with the implied rate curve embedded within the ECB's June macroeconomic projections. However, the Governing Council is appearing increasingly divided as to whether more easing is justified at this stage, and even if another cut is warranted, whether it should be delivered in September or later in the year. As such, focus will be President Lagarde’s characterisation of risks at the press conference, which will likely shape the market reaction.