Next week, we may concentrate less on the United States and more on the economies of Europe and China.
Monday 15.05. 06:30 GMT, Switzerland Producer Price Index (PPI) MoM (April)
The PPI is one of the main indicators used to monitor product prices at the producer level, i.e. at the level of manufacturing companies. It is an important tool for economists and policymakers who want to track economic changes and forecast future trends. Inflation, or a rise in the general price level, is one of the most critical challenges facing the economy. The PPI is important in assessing the level of inflation because the prices of goods and services sold by producers often make up a large proportion of the final cost to consumers. Increases in product prices at the producer level could translate into higher final prices for consumers and lead to higher inflation. In addition, the PPI could provide information on trends in the production and sale of products and market demand. When prices rise, producers can respond to rising costs by reducing output or raising prices, thereby affecting market demand. It is also important to note that the PPI is not the only indicator of inflation but is an important complement to other indicators, such as the Consumer Price Index (CPI). The CPI measures changes in the prices of products and services purchased by consumers, while the PPI measures changes in the prices of products at the producer level. Taken together, these two indicators can provide a more complete understanding of inflationary trends in the economy.
The previous reading was 0.2%, which was in line with forecasts. The 5-year outlook seems to be a sideways trend with significant deviations.
Source: Investing.com
On the one hand, if the reading is higher than expected, it means higher inflation, which could lead to a fall in the value of the Swiss franc. However, it is also an incentive for the Swiss National Bank to raise interest rates and reduce the money supply, and from that point of view, it may point to a rise in the value of the Swiss franc. On the other hand, if the reading is lower than expected, it means lower inflation, but it might give the Swiss National Bank an argument to lower interest rates and increase money issuance.
Impact: CHF
Tuesday 16.05. 02:00 GMT, China Industrial Production YoY (April)
Industrial production is an indicator that reports the value of output produced by industrial companies, mines, and utilities. It measures the value of goods and services produced, taking into account price changes in the economy, i.e., inflation. In short, industrial production gives us information about the overall level of economic activity in a country's industrial sector. It is an important tool for economists and investors who try to predict changes in the market. An increase in industrial production may mean economic growth, but also an increase in pollution and consumption of natural resources.
The previous reading was 3.9%, whereas the forecast was 4.0%. The current forecast is 10.1%. The latest figures are smaller than those of two or three years ago, although forecasts suggest some increases.
Source: Tradingeconomics
If the result is higher than expected, it may be a good signal for the Chinese currency (CNY), meaning the CNY value may rise. On the other hand, if the result is lower than expected, it may be a negative signal for the CNY, meaning that the CNY value may fall.
Impact: CNY
Tuesday 16.05. 09:00 GMT, Eurozone Gross Domestic Product (GDP) YoY (1Q)
Gross domestic product (GDP) indicates the total value of goods and services produced in a country for a certain period. GDP is an important indicator of the health of an economy because it gives an overall picture of how well or poorly a country's economy is doing. If the GDP growth is higher than expected, the economy is in good shape and growing faster than expected, which is a positive sign for the euro. On the other hand, if the GDP growth is lower than expected, the economy is weaker than expected, which is a negative signal for the EUR.
Source: Tradingeconomics
The previous reading was 1.3%, with a forecast of 1.4%. The current prognosis is 1.3%. The GDP growth has dropped from the two-digit numbers during the post-Covid-19 recovery and is now on a downward trend.
Impact: EUR
Tuesday 16.05. 06:00 GMT, UK Unemployment Rate (March)
The unemployment rate is an indicator that tells us what percentage of the total number of people who are able to work are currently unemployed and have looked for work in the last three months. It means that if someone is not working but also not looking for a job or has not been looking for a job in the last three months, they will not be considered unemployed in the context of this index.
The previous reading was 3.8% against a forecast of 3.7%. The current forecast is also 3.7%. From February 2021 to October 2022, we had an intense decline in the level of this indicator, after which we saw a slight upward trend.
Source: Tradingeconomics
If the economic outcome is higher than expected, it could negatively impact the value of the British pound (GBP). At the same time, if it is lower than expected, it could positively impact the value of the GBP.
Impact: GBP
Wednesday 17.05. 09:00, Eurozone Consumer Price Index (CPI) YoY (April)
The Consumer Price Index (CPI) is a measure of changes in the prices of goods and services that consumers purchase to meet their needs. The CPI is calculated based on a basket of products and services that consumers most frequently purchase. This basket contains a variety of product categories, such as food, housing, transportation, and healthcare. The CPI is an important tool for analyzing the economy because it reflects changes in the prices of products and services that affect consumption. An increase in the CPI means that the prices of products and services increase, which may affect consumers' purchasing decisions and cause a decrease in demand. Conversely, a fall in the CPI means that the prices of products and services are falling.
The previous reading showed 7.0%, which was in line with forecasts that are now at the same level. For half a year, inflation has had a downward trend after a year and a half of an upward trend, which reached a peak at around 10%.
Source: Tradingeconomics
If the reading is higher than expected, on the one hand, it means higher inflation, which favours a fall in the value of the euro, but on the other hand, it is an incentive for the ECB to raise interest rates and reduce the money supply. So, from that point of view, it could point to a rise in the euro's value. On the other hand, if the reading is lower than expected, it would mean lower inflation, but it would give the ECB an argument to cut interest rates and increase the money supply.
Impact: EUR
Stock to watch
Home Depot (HD) announcing its earnings results for the quarter ending on 04/2023. Forecast: 3.87. Positive earnings surprise in 10 out of the last 10 reports. Time: Tuesday, May 16, before the market opens.
TJX (TJX) announcing its earnings results for the quarter ending on 04/2023. Forecast: 0.7118. Positive earnings surprise in 7 out of the last 10 reports. Time: Wednesday, May 17.
Walmart (WMT) announcing its earnings results for the quarter ending on 04/2023. Forecast: 1.3. Positive earnings surprise in 8 out of the last 10 reports. Time: Thursday, May 18, before the market opens.
Burberry Group (BRBY) announcing its earnings results for the quarter ending on 03/2023. Forecast: 72.31. Positive earnings surprise in 3 out of the last 10 reports. Time: Time: Thursday, May 18, before the market opens.
Santa Zvaigzne-Sproge, CFA, Head of Investment Advice Department at Conotoxia Ltd. (Conotoxia investment service)
Materials, analysis, and opinions contained, referenced, or provided herein are intended solely for informational and educational purposes. The personal opinion of the author does not represent and should not be constructed as a statement, or investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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