Geopolitics Dominates the Markets
Investors remain concerned with the growth of geopolitical tension. Turkey's problems flow into the euro area, and the single currency fell sharply to the weakest level for the year. Turkey's lira has plunged to record lows on concerns about President Tayyip Erdogan's influence on monetary policy and increasingly authoritarian rule, and about a diplomatic rift with Washington over Ankara's detention of several Americans including an evangelical pastor.
The US policy exerts increased influence on financial markets. In addition to the escalation of the trade dispute in China, the United States is seeking to impose sanctions on Russia for the use of chemical weapons in the UK.
Economic data from Germany and the Eurozone will be in focus next week. Germany will publish an estimate for gross domestic product (GDP) in the second quarter on Tuesday. Analysts expect the quarterly growth rate to increase to 0.4% from 0.3% in the first quarter. Also on Tuesday, the Eurozone will report its second estimate for GDP in April-June.
Final Eurozone inflation data, to be released on Friday, is likely to confirm that headline consumer price inflation accelerated to 2.1% year-on-year in July from 2.0% in June, mainly because of a spike in the cost of energy.