Investing.com - Rhetoric rather than economics could be the main driver of sentiment in the week ahead, as investors watch further developments amid a brewing trade war between the United States and China that has sent a shiver through financial markets.
On the data front, the final reading of first-quarter U.S. growth will be the highlight of the week.
Besides the GDP report, this week's calendar also features data on personal consumption expenditures (PCE) inflation - the Federal Reserve's preferred metric for inflation. Investors will study the numbers to get a feel for U.S. inflation prospects and any impact the data could have on the Fed's monetary policy outlook for the months ahead.
Elsewhere, in Europe, market players will look ahead to a final reading on British growth data for further indications on the health of the economy and the likelihood of the Bank of England raising interest rates this year.
Traders will also focus on the first estimate of euro zone inflation figures, which are likely to lend support to the European Centrals Bank's decision not to rush stimulus withdrawal.
Ahead of the coming week, Investing.com has compiled a list of the five biggest events on the economic calendar that are most likely to affect the markets.
1. U.S.-China Trade Tensions
Some White House officials are trying to restart talks with China to avoid a trade war before U.S. tariffs on Chinese products take effect July 6, three people familiar with the plans said Friday.
The outreach signals a willingness by some U.S. officials to seek a truce before $34 billion in Chinese products are hit with tariffs rather than trigger a trade war between the world’s two largest economies.
Markets around the globe closed lower last week after U.S. President Donald Trump requested the U.S. Trade Representative identify $200 billion worth of Chinese goods for additional tariffs at a rate of 10%.
Consequently, Beijing stated that it would deliver its own set of counter measures, if required.
Those tariffs followed levies already announced by both nations earlier this month.
Washington and Beijing appeared increasingly headed toward open trade conflict after several rounds of negotiations failed to resolve U.S. complaints over Chinese industrial policies, lack of market access in China and a $375 billion U.S. trade deficit.
2. U.S. Q1 GDP - Final Estimate
The U.S. is to release final figures on first-quarter economic growth at 8:30AM ET (12:30GMT) Thursday.
It is expected to confirm that the economy expanded at a relatively-healthy 2.2% annual rate in the first three months of 2018, unchanged from a preliminary estimate. It grew by 2.9% in the fourth quarter of last year.
The data is unlikely to alter the outlook for monetary policy after Fed Chairman Jerome Powell reiterated last week that the case for continued gradual rate hikes remains strong.
The current U.S. economic expansion, already the second longest on record, has been given extra fuel in the form of major tax cuts, which will help keep the chances of a major slowdown quite low for the rest of this year.
3. U.S. PCE Inflation Data
The Commerce Department will publish data personal income and consumer spending for May, which include the personal consumption expenditures (PCE) inflation data, at 8:30AM ET (1230GMT) Friday.
The consensus forecast is that the report will show that the core PCE price index inched up 0.2% last month, after rising at a similar pace a month earlier.
On an annualized basis, core PCE prices are expected to rise 1.9%, compared to a 1.8%-increase in the preceding month.
The Fed uses core PCE as a tool to help determine whether to raise or lower interest rates, with the aim of keeping inflation at a rate of 2% or below.
This week's calendar also features top-tier U.S. data on CB consumer confidence, due on Tuesday, followed by a report on durable goods orders on Wednesday.
The Fed hiked interest rates for the second time this year earlier in June and signaled two additional rate hikes by year-end.
4. UK Final First Quarter GDP
The Office for National Statistics is to produce a third estimate on UK first-quarter economic growth at 0830GMT (4:30AM ET) on Friday.
The report is forecast to confirm the economy grew a paltry 0.1% in the January-to-March period. On a year-over-year basis, the economy is forecast to grow by just 1.2%, unchanged from an initial estimate.
That would mark the weakest performance since mid-2012 as an unusually cold start to the year and a slowdown in household spending and business investment constrained growth.
Despite this, the Bank of England last week left the door open for a rate hike at its next meeting in August, as policymakers judged that a slowdown in the economy in the first quarter was temporary and linked to unusually poor weather.
Politics is also likely to remain in focus with Britain's exit from the European Union due in less than a year and the shape of their future relationship still uncertain.
5. Euro Zone Flash Inflation
The euro zone will publish flash inflation figures for June at 0900GMT (5:00AM ET) Friday.
The consensus forecast is that the report will show consumer prices rose 2.0%, quicker than the 1.9% gain seen in May, propelled by higher energy costs.
Perhaps more significantly, however, the core figure, without volatile energy and food prices, is seen inching down to 1.0%, from 1.1% a month earlier.
The European Central Bank targets inflation of close to but just below 2% for the euro zone as a whole.
Germany, France, Italy and Spain will produce their own CPI reports throughout the week.
The ECB recently indicated it aimed to wrap up its massive stimulus program at the end of this year, but pledged to keep interest rates at current levels until at least the summer of 2019.
Stay up-to-date on all of this week's economic events by visiting: http://www.investing.com/economic-calendar/