Synopsis:

Danske Bank anticipates that the upcoming ECB meeting will be relatively uneventful, maintaining the current policy stance. Despite some weaker-than-expected economic data, concerns over core inflation will likely lead the ECB to wait for more data before making any significant policy changes.

Key Points:

• Economic Data: Limited new data since the last meeting, with weaker-than-expected euro area PMIs and industrial production figures balanced by higher-than-expected core inflation rates.
• Policy Stance: The ECB's perspective on the economy and its policy stance are unlikely to have changed significantly.
• Inflation Concerns: Persistent concerns about the pace of inflationary progress towards the target.
• Data Dependency: The ECB is expected to wait for additional data on inflation, wage growth, productivity, and profit before altering its communication or policy stance.
• Meeting Nature: The July meeting will likely be a stock-taking meeting, relatively uneventful for markets.
• French Bonds Spread: Lagarde may address questions about the recent spread widening of French bonds, expected to respond similarly to Chief Economist Lane, indicating the spread widening has been orderly.

Conclusion:

Danske Bank expects the ECB to maintain its current policy stance in the July meeting, awaiting further data on inflation and related metrics before making significant changes. The meeting is anticipated to be relatively uneventful, with persistent concerns about inflation and data dependency guiding the ECB's cautious approach. Lagarde may address issues related to French bond spreads, emphasizing the orderly nature of recent changes.