Yesterday, the US inflation data pleased investors, coming out lower than expected at 3.0 per cent (versus 3.1 per cent) and falling for the third consecutive month. This boosted the US stock indices to new record highs as the possibility of the first interest rate cut in September strengthened. Meanwhile, Germany’s CPI was reported as expected at 2.2 per cent which was a 0.2 per cent drop compared to the previous month. Next week, we may follow the UK and the Euro Area’s inflation data, which may have an impact on the upcoming interest rate decision on Thursday.
Table of Contents:
- China Gross Domestic Product (GDP) YoY (2Q)
- UK Consumer Price Index (CPI) YoY (June)
- Euro Area Consumer Price Index (CPI) YoY (June)
- Euro Area Interest Rate Decision
Monday 15.07. 04:00 CET, China Gross Domestic Product (GDP) YoY (2Q)
The Chinese economy showed robust growth in the first quarter of 2024, expanding by 5.3 per cent year-on-year, beating forecasts of 5.0 per cent. This growth outpaced the 5.2 per cent expansion in the previous quarter and marked the most substantial annual growth since Q2 of 2023. The upswing was supported by ongoing stimulus initiatives from Beijing and boosted by spending associated with the Lunar New Year festivities. Fixed investment during this period also surged by 4.5 per cent, the highest rate in nearly a year, exceeding the expected 4.3 per cent. The Chinese economy may have laid a solid groundwork to meet the targeted GDP growth of approximately 5 per cent for the year.
Analyst expectations for the Q2 2024 GDP growth in China is 5 per cent.
Source: Tradingeconomics.com
A higher-than-expected reading may have a bullish effect on the CNY, while a lower-than-expected reading could be bearish for the CNY.
Impact: USD/CNY, EUR/CNY
Wednesday 17.07. 08:00 CET, UK Consumer Price Index (CPI) YoY (June)
In May 2024, the UK witnessed a slowdown in the annual inflation rate to 2 per cent, the lowest since July 2021, down from 2.3 per cent in April, aligning with predictions. It brought inflation back in line with the Bank of England's 2 per cent target, driven by a deceleration in the prices of food products such as bread, cereals, vegetables, and sweet ones like sugar, jam, syrups, chocolate, and confectionery. Additionally, prices declined for dining out and accommodation (5.8 per cent from 6 per cent) as well as for recreational activities and cultural outings (3.9 per cent vs 4.4 per cent).
Service inflation also eased slightly to 5.7 per cent from 5.9 per cent, exceeding the expected 5.5 per cent. Transport costs increased (0.5 per cent from 0.1 per cent), mainly due to higher prices for motor fuels and transportation services, offset by reduced prices for second-hand cars. Core inflation for the same period decreased to 3.5 per cent, the lowest since October 2021, compared to 3.9 per cent in April. The Consumer Price Index rose by 0.3 per cent from the previous month.
Analysts expect the inflation rate in the UK to remain unchanged at 2 per cent from the previous month's reading.
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Source: Tradingeconomics.com
A higher-than-expected reading may have a bearish effect on the GBP, while a lower-than-expected reading could be bullish for the GBP.
Impact: USD/GBP, EUR/GBP
Wednesday 17.07. 11:00 CET, Euro Area Consumer Price Index (CPI) YoY (June)
Initial estimates show that the annual inflation rate in the Euro Area dipped to 2.5 per cent in June 2024, following a brief uptick to 2.6 per cent in May, in line with market expectations. Prices increased at a slower rate for food, alcohol, and tobacco (2.5 per cent compared to 2.6 per cent) as well as for energy (0.2 per cent compared to 0.3 per cent). In comparison, inflation remained stable for non-energy industrial goods (at 0.7 per cent) and services (at 4.1 per cent). On a month-to-month basis, the Consumer Price Index (CPI) rose by 0.2 per cent, mirroring the increase observed in May. Meanwhile, core inflation, which excludes energy, food, alcohol, and tobacco, surprisingly held steady at 2.9 per cent annually, defying expectations of a decrease to 2.8 per cent. In the largest economies of the Euro Area, inflation decreased in Germany (2.5 per cent from 2.8 per cent), France (2.5 per cent from 2.6 per cent), Spain (3.5 per cent from 3.8 per cent), and Ireland (1.5 per cent from 2 per cent), but rose in Italy (0.9 per cent from 0.8 per cent) and the Netherlands (3.4 per cent from 2.7 per cent).
Analysts' expectations align with the initial estimates of the 2.5 per cent inflation rate in the Euro Area in June.
Source: Tradingeconomics.com
A higher-than-expected reading may have a bearish effect on the EUR, while a lower-than-expected reading could be bullish for the EUR.
Impact: EUR/USD, EUR/GBP, EUR/PLN
Thursday 18.07. 14:15 CET, Euro Area Interest Rate Decision
The European Central Bank lowered the Euro Area key interest rate by 25 basis points from 4.50 per cent to 4.25 per cent in June, interrupting the 9-month streak of unchanged rates. However, the ECB officials stressed that it would maintain a meeting-by-meeting and data-driven approach for future rate-cuts decisions. ECB officials also expressed concern about whether the euro area economy would recover as expected, as it may depend largely on a boost to private consumption. Meanwhile, according to the minutes of the June meeting, the available data did not increase policymakers' confidence that Euro Area inflation is on track to reach the 2 per cent target by 2025.
Analysts expect the Euro Area's key interest rate to remain unchanged in July.
Source: Tradingeconomics.com
A decision on a higher-than-expected interest rate may have a bullish effect on the EUR, while a decision on a lower-than-expected interest rate could be bearish for the EUR.
Impact: EUR/USD, EUR/GBP, EUR/PLN
Santa Zvaigzne-Sproge, CFA, Head of Investment Advice Department at Conotoxia Ltd. (Conotoxia investment service)
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