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Big week for central banks

Big week for central banks

The US economy continued to grow last quarter but at a slower pace. GDP rose at an annual rate of 1.5%, down from a revised 2% in the previous quarter. The softening US jobs market and looming tax-policy changes prompted consumers to cut back on household purchases, which accounts for around 70% of the economy.

This week sees the central banks in the US, the eurozone and UK meet within 24 hours of each other. These meetings take place as we approach the fifth anniversary of the financial crisis. With a global recovery floundering, even after central banks have injected trillions of dollars of liquidity and interest rates are at near zero, policy makers now have to consider fresh strategies to combat the slowdown and stimulate flagging economies. Markets will be closely watching for comments indicating changes to policies.

After sparking a global market rally last week, ECB President Draghi continues on the offensive this week as he battles to implement a solution to the eurozone debt crisis. Markets eagerly await tangible developments to build consensus among governments and central banks for a plan to ease borrowing costs in Spain and Italy ahead of the ECB policy makers meeting on 2 August.

The Euro has managed to keep hold of some of its gains. EUR/USD hit a high of $1.2389 on Friday but has since eased back over 1 cent ahead of the ECB policy meeting on Thursday. Sterling also made gains against the USD hitting a 5 week high of $1.5767 on Friday.

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