GDP growth rates in both the US and the UK came in slightly above expectations, at 1.4 per cent and 0.3 per cent per annum respectively. Because of this, both the US dollar and the pound sterling strengthened. EUR/USD fell below the 1.07 level, USD/PLN rose to 4.03 and GBP/PLN rose to 5.09. The coming week will see preliminary inflation readings from Germany and the Eurozone. Wednesday will see the FOMC meeting report, which will show how the Fed is looking at the future of interest rates. We will close the week with data from the US labour market, whose situation has recently started to deteriorate, which could be a definite factor for an interest rate cut. Current forecasts are for a 70 per cent probability of a first cut in September this year.
Table of contents:
- German consumer price index (CPI) annualised (June)
- Eurozone consumer price index (CPI) annualised (June)
- FOMC meeting minutes
- US unemployment rate (June)
Monday, 1.07, 14:00 CET, German consumer price index (CPI) annualised (June)
Consumer price inflation in Germany was confirmed at 2.4 per cent in May 2024, compared to a three-year low of 2.2 per cent in each of the previous two months. Inflation rose for the first time in five months. It was driven by higher service and food costs. Meanwhile, commodity prices rose at a slower pace and energy prices continued to fall, despite the end of the temporary VAT cut on gas and district heating in April 2024.
Analysts' current forecast is for a token decline in inflation to 2.3 per cent.
Source: Tradingeconomics.com
A higher-than-expected reading could have a bullish impact on the EUR, while a lower-than-expected reading could be bearish for the EUR.
Impact: EUR/USD, EUR/PLN
Tuesday, 2.07, 11:00 CET, Eurozone consumer price index (CPI) annualised (June)
The annual inflation rate in the euro area rose to 2.6 per cent in May from 2.4 per cent in each of the previous two months, according to preliminary data. Energy prices rebounded and grew faster for services, but slowed for food, alcohol and tobacco and manufactured goods. The services sector was the largest contributor to inflation growth.
Among the major economies, inflation accelerated in Germany (2.8 per cent), France (2.6 per cent) and Spain (3.8 per cent), but declined slightly in Italy (0.8 per cent). Despite this, the ECB decided to cut interest rates at its last meeting, causing the EUR/USD to fall to 1.07.
The current analyst forecast is for inflation to fall to 2.4 per cent.
Source: Tradingeconomics.com
A higher-than-expected reading could have a bullish impact on the EUR, while a lower-than-expected reading could be bearish for the EUR.
Impact: EUR/USD, EUR/PLN
Wednesday 3.07, 20:00 CET, FOMC meeting minutes
The most important conclusions we could draw from the so-called minutes include:
- Inflation is proving more persistent than previously expected.
- Monetary policy expectations have shifted, pointing to fewer than two 25 basis point interest rate cuts by the end of the year.
- The dollar strengthened as other central banks were expected to start easing monetary policy sooner than the Fed, which eventually happened.
- Predictions pointed to a slowdown in the pace of Fed balance sheet reduction.
- Short-term inflation expectations rose, but long-term expectations remained stable and low.
Source: Tradingeconomics.com
More hawkish signals from the FOMC meeting minutes could influence USD growth, while more dovish signals could herald USD declines.
Impact: EUR/USD, USD/PLN
Friday, 5.07, 14:30 CET, US unemployment rate (June)
The US unemployment rate rose to 4 per cent in May 2024, the highest level since January 2022, when it stood at 3.9 per cent. This result surprised market expectations, which had predicted that the unemployment rate would remain unchanged. This increases the pressure on the Federal Reserve to cut interest rates.
The current analyst forecast is for the unemployment rate to remain at 4 per cent.
Source: Tradingeconomics.com
Higher-than-expected unemployment could be bearish for the USD, while lower-than-expected unemployment could act bullishly on the USD.
Impact: EUR/USD, USD/PLN, US500
Grzegorz Dróżdż, CAI MPW, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
The above trade publication does not constitute an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No. 596/2014 of April 16, 2014. It has been prepared for informational purposes and should not form the basis for investment decisions. Neither the author of the publication nor Conotoxia Ltd. shall be liable for investment decisions made on the basis of the information contained herein. Copying or reproducing this publication without written permission from Conotoxia Ltd. is prohibited. Past performance is not a reliable indicator of future results.
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