China's GDP growth turned out to be slightly less than expected at 6.3%, which is still impressive. However, global disinflation remains a challenge, and we will find out the answers in the coming week when the Fed and ECB make their interest rate decisions. We will also find out whether the US economy continues to slow, and we will end the week by looking at the underlying PCE inflation rate from that economy.
Monday, 24.07, 7:30 GMT, PMI for Germany (preliminary data for July)
The German PMI provides an insight into the level of construction industry activity reported by purchasing managers. The measure provides insights into the state of the German construction industry, as purchasing managers are assumed to have access to first-hand data on the performance of their companies. A reading above 50 indicates growth, while a reading below 50 indicates contraction in the sector.
The last time the German manufacturing PMI exceeded 50 was in June 2022, indicating that the German manufacturing industry has been contracting since then. The final reading for June 2023 was 40.6, which was worse than initial expectations (41.0). The downward trend since July 2021 continued in June and has the potential for further decline. The reasons? A contraction in manufacturing, declining orders, a decline in job creation and forward-looking concerns such as inflation, corporate financial conditions and geopolitical tensions, among others.
Source: Tradingeconomics.com
A higher than expected reading could be bullish for the EUR, while a reading below expectations could be bearish for the EUR.
Impact: EUR
Tuesday, 25.07, 14:00 GMT, US CB consumer confidence index (June)
The Conference Board's Consumer Confidence Index (CCI) measures consumer confidence in the economy. It is an indicator that can forecast future consumer spending, a key factor in overall economic activity. Higher values indicate greater consumer optimism.
The latest reading particularly positively surprised the markets, coming in at 109.7, while analysts had expected a reading of 104. The index for assessing the current business and labour market situation also rose, as did the index for expectations for the coming months regarding income, business and the labour market. Although expectations for the year ahead were slightly below levels suggesting a recession, the number of consumers expecting a recession in the next 12 months decreased significantly compared to May.
Source: https://www.conference-board.org/topics/consumer-confidence
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
Wednesday, 26.07, 18:00 GMT, US interest rate decision
Perhaps the most important macroeconomic data next week will be the Federal Open Market Committee's (FOMC) interest rate decision, followed by a speech by chairman Jerome Powell. Analysts' consensus is for another 25 basis point hike, to 5.5 percent, and the futures market's valued probability of this event is very high, suggesting an almost certain hike at the upcoming meeting. The market assumes that this will also be the last hike in this cycle. This seems to be dictated by inflation, which is falling much faster than previously expected.
Source: Tradingeconomics.com
A higher than expected reading could be bullish for the USD, while a reading below expectations could be bearish for the USD.
Impact: USD
Thursday, 27.07, 12:15 GMT, Eurozone interest rate decision
The following day will see another key interest rate decision, this time from the European Central Bank (ECB). As with the FOMC, analysts are predicting a 25 basis point hike to 4.25 percent. However, the situation in Europe is fundamentally different from that in the United States, where the expected rate of decline in inflation has already been exceeded. Last week's CPI inflation reading of 5.5 percent in Euroland was in line with expectations. This could mean continued pressure on the ECB for possible further interest rate rises.
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, 27.07, 12:30 GMT, US quarterly gross domestic product (GDP) (Q2 this year).
Gross Domestic Product (GDP) is a widely used economic indicator that measures the total value of all goods and services produced and sold within a country's borders over 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, track economic growth over time and assess the impact of different economic policies.
Real gross domestic product (GDP) growth in the first quarter of 2023 was 2.0 per cent. This was up from 2.6 per cent growth in the fourth quarter of the previous year. The increase in real GDP in the first quarter reflected growth in consumer spending, exports, government spending and non-residential investment, which was partially offset by a decline in private investment and real estate investment. Analysts are now forecasting a gentle slowdown in GDP growth to 1.8 per cent in the second quarter of this year. This means that we are further into the economic slowdown in the United States.
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
Friday, 28.07, 12:30 GMT, US core PCE inflation (June)
PCE (Personal Consumption Expenditures inflation core) is a measure of inflation that excludes the price of food and energy from the basket of goods and services. It focuses on changes in the prices of other consumer goods and services, which are less susceptible to short-term fluctuations. Core PCE inflation is used by the Federal Reserve as an indicator of the impact of inflation on the economy, as it helps detect more persistent price changes.
Last week we learned that the overall rate of price growth is slowing faster than expected and is now only 3 per cent. The main reason for this low reading is the reduction in commodity and energy prices. However, if we look at core PCE inflation prices, which does not take these factors into account, it was 4.6 per cent in May, indicating the absence of disinflationary trends. Analysts are now forecasting a symbolic decline to 4.3 per cent.
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
Microsoft (MSFT) announces financial results for Q2 ending June 2023. Forecast EPS: 2.55. Positive earnings surprise in 9 of last 10 reports. Deadline: Tuesday, 25 July, after market close.
Alphabet (GOOGL) announces financial results for Q2 ending June 2023. Forecast EPS: 1.34. Positive earnings surprise in 6 of last 10 reports. Deadline: Tuesday, 25 July, after market close.
Meta Platforms (META) announces financial results for Q2 ending June 2023. Forecast EPS: 2.89. Positive earnings surprise in 5 of last 10 reports. Deadline: Wednesday, 26 July, after market close.
Coca-Cola (KO) announces financial results for Q2 ending June 2023. Forecast EPS: 0.7186. Positive earnings surprise in 10 of last 10 reports. Deadline: Wednesday, 26 July, before the market opens.
Amazon.com (AMZN) announces financial results for Q2 ending June 2023. Forecast EPS: 0.353. Positive earnings surprise in 7 of last 10 reports. Deadline: Thursday, 27 July.
Grzegorz Dróżdż, CAI MPW, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
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