After just over a month of almost steady growth, the markets took a bit of correction towards the end of the last trading week.

Part of that is due to the extended weekend. US traders were away on holiday, and investors didn’t want to be exposed.

The consensus among analysts is that it was time for some profit-taking. That means the drop had little to do with the barrage of data last week.

As most of the attention focuses on the conclusion of this quarter, we still are getting trailing data from the last one.

A description of the recovery that is gaining traction is the “Nike swoosh”. This is a sudden drop and slow climb back.

With the market already pricing in a bad result for Q2, the data is likely to provide a muted response in the short term. However, if investor sentiment doesn’t improve after returning from the holidays, then the reminder of how bad things were a few months ago might tip the scales towards more pessimism.

It’s Finally Catching Up to Japan

Initially, Japan was cited as one of the examples of the countries that best-handled COVID. But that didn’t stop the country from eventually feeling the economic impact. Their main trade partners had to shut down!

Japan also missed out on the expected boost from hosting the Olympics. This would have helped offset some of the economic drag from the tax hike late last year.

Projections are for Japan’s Q2 final quarterly GDP to be revised further lower to -8.1% compared to -7.8% in the prior reading. This compares to a -0.6% change in Q1, confirming Japan is in a recession.

The real impact is visible in the annualized GDP change. Expectations are for this to be revised to -28.6% compared to -27.8% in the preliminary reading.

What’s more likely to move the market at that time, though, is the Current Account. Expectations are for this to increase substantially to ¥1.87T from ¥168B last month. A substantial beat of expectations here could strengthen the yen (push the USDJPY down), while a miss could weaken it.

No Major Surprise Expected from the EU

Tomorrow, we are expecting the eurozone to release its final measure of last quarter’s GDP.

Projections indicate that it will confirm a deceleration of -12.1% in quarterly GDP, and -15.0% annualized.

The market is unlikely to react to the publication unless there is at least a percentage point of revisions. It would be a major surprise because that amount of revision for the final data is unheard of.

UK’s Rebound Expected to Slow

On Friday, the UK reports its final GDP figures. We can expect these to simply affirm what has already been known.

Attention is likely to focus on the monthly GDP, and that has the potential to move the pound substantially. The UK is one of the few countries giving us relatively fresh data on the economy following the pandemic.

Projections are for UK July GDP to slow its growth pace to 6.7% annualized, compared to 8.7% in June. A beat in expectations here could also help the EUR, which has been struggling following comments by Chief Economist Haldane last week.

The logic is that if things are improving in the UK, they might be across the channel as well.