Another important week lies ahead for global financial markets, with potentially significant implications. Prominent among the key events are inflation readings from Germany and the United States, as well as interest rate decisions in New Zealand. It is worth noting that the global economic slowdown appears to be less severe than initially anticipated. Despite declining inflation rates, central banks continue to tighten monetary policy.
Monday, 10.07, 6:00 GMT, CPI inflation for Germany (June)
Currently, rising interest rates in the euro area seem to be having an impact on inflation levels in Germany. Consumer Price Index (CPI) inflation has been falling since November last year, when it peaked at 8.8%. The advance reading of June inflation in Germany showed an increase to 6.4% year-on-year. This reading was higher than the 6.1% level recorded in May and marginally have been higher than market expectations of 6.3%.
The core inflation rate, which excludes volatile factors such as food and energy, also accelerated from 5.4% in May to 5.8%. Both measures of inflation remain well above the European Central Bank's target of 2.0%. However, the data presented are preliminary estimates and the final reading will be known on Monday.
Source: Tradingeconomics.com
A higher-than-expected reading may be bullish for the EUR, while a lower-than-expected reading may be bearish for the EUR.
Impact: EUR
Wednesday, 12.07, 2:00 GMT, interest rate decision in New Zealand
We will have to wait until Wednesday for further significant economic data, when New Zealand's central bank will decide whether to raise interest rates. In 21 months, interest rates have risen from 0.25% to 5.5%, a record increase since the start of this century. Analysts are now predicting another 25 basis point hike. However, interest rates in this economy are still below CPI inflation, which stood at 6.7% in the first quarter. This currently puts real interest rates, i.e. taking inflation into account, at -1.2%.
Source: Tradingeconomics.com
A higher-than-expected reading may be bullish for the NZD, while a lower-than-expected reading may be bearish for the NZD.
Impact: NZD
Wednesday, 12.07, 12:30 GMT, CPI inflation and core inflation for the United States (June)
The last four inflation readings have been lower than analysts' expectations, indicating that inflation is falling faster than previously expected. For the past 11 months, inflation in this economy has fallen steadily from 9.1% to the latest reading of 4%. In addition, the core index, which excludes volatile factors such as food and energy, slowed to 5.3% from a peak of 6.6%, the lowest since November 2021. This supports the case for the Fed to consider halting the current monetary tightening cycle.
The main factors responsible for the fall in inflation in May appeared to be the cost of fuel, which fell by 37%, the cost of energy (down 11.7%) and the cost of used vehicles (recorded a fall of 4.2%).
Analysts are now forecasting that consumer inflation (CPI) will fall to 3.6% and core inflation could fall to 5%.
Source: Tradingeconomics.com
A higher-than-expected reading may be bullish for the USD, while a lower-than-expected reading may be bearish for the USD.
Impact: USD
Thursday, 13.07, 14:00 GMT, UK monthly gross domestic product (GDP) (May)
Gross domestic product (GDP) indicates the total value of goods and services produced in a country over a certain period of time. GDP is an important indicator of the health of an economy because it gives an overall picture of how a country's economy is performing. If GDP growth is above expectations, the economy is in good shape and growing faster than expected, which is a positive sign for the currency. On the other hand, if GDP growth is below expectations, the economy is weaker than expected, which is a negative sign for the currency.
The latest monthly GDP reading showed an increase of 0.2% compared to the previous month, which was in line with expectations. If we look at the annual data, the last reading for the first quarter of this year clearly indicated an economic slowdown, where the reading was 0.2% compared to the same period last year. However, it is worth remembering that we would have to see at least two consecutive quarters of GDP contraction to speak of a technical recession.
Source: Tradingeconomics.com
A higher-than-expected reading may be bullish for the GBP, while a lower-than-expected reading may be bearish for the GBP.
Impact: GBP
Stocks to watch
PepsiCo (PEP) Announces financial results for Q2 ending June 2023. Forecast EPS: 1.95. Positive earnings surprise in 10 of last 10 reports. Time: Tuesday, 11 July, before the market opens.
UnitedHealth (UNH) Announces financial results for Q2 ending June 2023. Forecast EPS: 6.07. Positive earnings surprise in 10 of last 10 reports. Time: Friday, 14 July, before the market opens.
JPMorgan (JPM) Announces financial results for Q2 ending June 2023. Forecast EPS: 3.98. Positive earnings surprise in 9 of last 10 reports. Time: Friday, 14 July.
Grzegorz Dróżdż, CAI MPW, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
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