ECB to hike again, Spain goes to the polls

Data released this week support our view that the euro-zone economy contracted in Q2. Meanwhile, France’s government presented a plan to reduce its budget deficit next year but its plans are likely to be watered down by parliament. Meanwhile, the result of Spain’s general election on Sunday probably won’t have a big impact on the economic outlook. Next week, the ECB is almost certain to hike by 25bp, and Christine Lagarde is likely to emphasise that policy will remain tight for a prolonged period of time. On the data front, we expect to learn that tourism boosted Spain’s GDP in Q2, but that the French economy stagnated.