Next week to watch (22. – 26.05.)

19.05.2023 09:20|Investment Advice Department, Conotoxia Ltd.

Next week, the two largest economies on both sides of the North Atlantic Ocean will announce their final 1Q 2023 GDP growth data. As the preliminary data for both - the US and Germany - failed to meet the market’s expectations, the final data may confirm or change the GDP growth results in both countries. While the US has a so-called “buffer”, a lower-than-expected result for Germany would indicate a recession. 

Tuesday 23.05. 07:30 GMT, Germany Manufacturing Purchasing Managers Index (PMI) May preliminary data

The German Purchasing Managers' Index provides insight into the construction industry's activity level as reported by purchasing managers. This measure provides an understanding of the state of the German construction industry, as it is assumed that purchasing managers have access to first-hand data on the performance of their companies. 

 A reading above 50 indicates expansion, while a reading below 50 indicates contraction. The last time the German manufacturing PMI was above 50 was in June 2022, and the preliminary reading for May 2023 is forecast to be 45.7. Furthermore, it is worth noting that the manufacturing PMI data in Germany has held a downward trend since July 2021, and actual numbers are often reported lower than expected. 

Falling factory activity has been linked to lower orders amid weaker demand and efforts to unwind buffer stocks in combination with weaker job growth. Also, suppliers' delivery times were reported record-high in the previous month.

Source: Tradingeconomics.com

A higher-than-expected reading could be bullish for the EUR, while a lower-than-expected reading could be bearish for the EUR.  

Impact: EUR

Wednesday 24.05. 06:00 GMT, U.K. Consumer Price Index (CPI) YoY April

The Consumer Price Index (CPI) measures the change in prices consumers pay for a particular basket of goods and services over a certain period. This information will show changes in comparison to one year ago. CPI is a key indicator for inflation - a higher index indicates higher inflation.

In March 2023, consumer price inflation in the UK fell to 10.1% on a year-on-year basis. This figure was lower than the 10.4% recorded in February, but higher than the 9.8% rate expected by the market. The same forecast of 9.8% is being made for April's CPI data, suggesting that the UK's double-digit inflation may be coming to an end. 

The inflation rate has remained above 10% for the seventh consecutive period, surpassing the Bank of England's target of 2% for nearly two years. It indicates that policymakers may consider keeping the interest rates high for longer than expected. The core inflation rate, which excludes volatile items such as energy and food, remained steady at 6.2% in March, staying close to the record high of 6.5% observed in September.

Source: Tradingeconomics.com

Higher-than-expected data may have a bullish impact on the British pound and a bearish effect on the stock market. In contrast, lower-than-expected data may have a bearish impact on the British pound and a bullish effect on the stock market.

Impact: GBP, FTSE 100, and other indexes

Thursday 25.05. 06:00 GMT, Germany Gross Domestic Product (GDP) QoQ Q1

Gross Domestic Product (GDP) is a widely used economic indicator that measures the total value of all goods and services produced within a country's borders during a given period, usually a year. It is an important indicator of a country's overall economic health and growth. It is often used to compare the economic performance of different countries, to track economic growth over time and to assess the impact of different economic policies.

A preliminary estimate released on April 28 revealed that Germany's GDP remained unchanged in the first quarter of 2023. This comes after a revised -0.5% contraction in the previous three months, failing to meet market expectations of a 0.2% expansion. The decline in household consumption and public spending at the start of the year can be attributed to persistently high inflation and higher borrowing costs, which have had a negative impact on demand in Europe's largest economy. However, there were positive developments in investment and exports. Compared with the previous year, GDP fell slightly by 0.1%, the first contraction in two years.

Source: Tradingeconomics.com

A higher-than-expected reading could be bullish for the EUR, while a lower-than-expected reading could be bearish for the EUR. 

Impact: EUR

Thursday 25.05. 12:30 GMT U.S. Gross Domestic Product (GDP) QoQ Q1

According to a preliminary estimate, the US economy experienced a slowdown in the first quarter of 2023, with an annualized growth rate of 1.1%. This is a decrease from the 2.6% expansion observed in the previous quarter and fell short of market expectations of a 2% growth. The growth rate recorded in Q1 2023 represents the slowest pace of expansion since Q2 2022. Several factors contributed to this slowdown, including a deceleration in business investment growth, a decline in inventories, and the adverse effects of rising interest rates on the housing market.

However, there were some positive factors in the economy. Despite persistently high inflation, consumer spending growth accelerated to 3.7%, surpassing the 1.0% growth seen in Q4. Public spending also increased at a faster rate of 4.7% compared to 3.8%. Moreover, the net external demand positively contributed to the GDP as exports outpaced imports in Q1 2023.

Source: Tradingeconomics.com

A higher-than-expected reading could be bullish for the USD, while a lower-than-expected reading could be bearish for the USD. 

Impact: USD

Stocks to watch

NVIDIA Corporation (NVDA) announcing its earnings results for the quarter ending on 04/2023. Forecasted EPS: 0.9199. Positive earnings surprise in 9 out of the last 10 reports. Time: Wednesday, May 24, after the market closes.

Toronto Dominion Bank (TD) announcing its earnings results for the quarter ending on 04/2023. Forecasted EPS: 2.09. Positive earnings surprise in 10 out of the last 10 reports. Time: Thursday, May 25, before the market opens.

PDD Holdings Inc DRC (PDD) announcing its earnings results for the quarter ending on 03/2023. Forecasted EPS: 4.47. Positive earnings surprise in 9 out of the last 10 reports. Time: Friday, May 26, 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. 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.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73,18% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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Santa Zvaigzne-Sproģe, CFA

Santa Zvaigzne-Sproģe, CFA

Head of Investment Advice Department

A certified financial analyst with a broad experience in financial markets obtained working as a broker and securities specialist in various financial institutions across the Baltics.

In addition to obtaining the prestigious CFA license from CFA Institute and Advanced Certificate from CySEC in 2022 as well as Investment Advisor’s license from Baltic Financial Advisor’s Association in 2019, Santa holds MBA from Swiss Business School in Switzerland and master’s degree in finance from BA School of Business and Finance in Latvia.


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76.23% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76.23% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trading on CFDs is provided by Conotoxia Ltd. (CySEC no.336/17), which has the right to use the Conotoxia trademark.