【This Week's Outlook】Focus on Friday: Divergent PMI Trends in Europe and the U.S.; Russia-Ukraine Conflict Worsens European Supply Chain Bottlenecks!

One key channel through which Russia influences Europe is energy supply. Conversely, Europe has been especially proactive in imposing sanctions on Russia. Yet if Russia defaults on its debt, European creditors will inevitably suffer. Therefore, as the leading bloc imposing sanctions on Russia, the eurozone stands to incur significantly greater damage than the United States—geographically distant and merely fanning the flames from afar. Data from the eurozone and the UK may thus carry greater weight this week, since the U.S. Federal Reserve’s 50-basis-point rate hike in May is virtually certain, with FedWatch assigning a 91% probability. Against the backdrop of persistently high U.S. inflation and still-solid economic growth, there is little justification for Chair Powell and the Fed to delay tightening. Why focus on eurozone data? Because of the European Central Bank’s (ECB) recent policy signals. Its asset purchase program remains in net-buying mode—but purchases are scheduled to taper over the next three months: €40 billion per month in April, €30 billion in May, and €20 billion in June. By July, net purchases are expected to cease entirely—the final month of the ECB’s net asset purchases. What happens once net purchases reach zero? Drawing from the Fed’s experience, interest-rate hikes typically follow soon thereafter. This hiking cycle is unfolding at an accelerated pace—akin to watching a video on fast-forward. Accordingly, the ECB’s June meeting is highly likely to announce that net purchases will end in August or September. This timeline has been confirmed by ECB President Christine Lagarde, who stated: “The ECB will conclude its asset purchase program before raising interest rates. The precise timing for ending bond purchases will be assessed in June. The interval between ending asset purchases and the first rate hike could range from one week to several months. We expect credit standards to tighten gradually over the coming months, but it is still too early to discuss monetary tightening.”

This Week, Focus Shifts to Europe

The密集 release period for major U.S. economic data this month has concluded; this week’s spotlight turns to Europe. First up is the ECB’s monetary policy meeting on Thursday. Over the National Day holiday period, ECB President Christine Lagarde and other officials signaled that a third rate cut at the October meeting is possible. Markets have readily embraced this view: current pricing fully reflects two 25-basis-point cuts for the eurozone this year—broadly aligned with market expectations for the Fed. A 25-bp cut in October would be a reasonable move for the eurozone: On one hand, after the conclusion of the August Olympics, both manufacturing and services PMIs deteriorated sharply, signaling dual weakness; meanwhile, eurozone CPI turned negative month-on-month in September, accelerating downward. On the other hand, the Fed’s 50-bp cut in September has further widened room for other G10 central banks to ease—and the eurozone’s easing pace now matches the U.S., a positive for the euro. However, since a 25-bp cut in October is already fully priced in, the more critical focus of this meeting lies in updated economic forecasts and forward guidance on the future path of policy rates. If the ECB’s tone remains dovish, it could further dampen the euro’s rebound potential. Having discussed the euro, let’s turn to the pound. Following the Labour Party’s decisive election victory, the UK’s fundamental recovery has remained robust—a point we’ve highlighted repeatedly in analyses such as 'The Pound Is Worth Waiting For.' Moreover, both the UK and the U.S. currently hold the highest policy interest rates among G10 nations, meaning no interest-rate differential exists between them—a tailwind for the pound. After two consecutive rate cuts in August and September, the UK’s unemployment rate and CPI data for September—due this week—will reveal how effective those cuts have been. Should CPI continue stabilizing and unemployment avoid further increases, the pound is likely to retain solid fundamental support.

Europe Top Stories: Weekly Summary

Jul 27, 2026

ICIS Europe reports cautious bullish sentiment in PET, PE, and PP markets driven by crude oil spikes and Middle East conflict. Acrylate ester markets face trade uncertainty, phosphate fertilizer supply remains tight, and the UK chemicals sector welcomes new leadership.

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Europe Top Stories: Weekly Summary

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