Key macroeconomic data are coming out next week from the eurozone and Germany. Inflation and unemployment data may signal the eurozone's economy's overall health and give policymakers insight into upcoming monetary decisions.
Tuesday 27.06. 14:00 GMT, US CB Consumer Confidence (June)
The Conference Board's Consumer Confidence Index (CCI) measures consumer confidence in the economy. It is an indicator that can predict future consumer spending, a key factor in overall economic activity. Higher values indicate greater consumer optimism. The CCI is measured on the basis of the level of confidence in 1985, which is set at 100 points. An index above 100 points indicates a higher level of confidence than in 1985. Conversely, a value below 100 points indicates a lower level of confidence than in 1985.
The US Consumer Confidence Index has been relatively stable around 100 for the past year. Last month, the index reading was forecast at 99.00 – the lowest since July 2022. The result was better than expected – 102.3 – but lower than the previous month. The decline in the overall consumer confidence index may be related to worsening current employment conditions.
Source: conference-board.org
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 29.06. 12:00 GMT, Germany Consumer Price Index (CPI) YoY (June preliminary)
The CPI index measures changes in the prices of consumer goods and services. It covers different types of products, such as food, fuel, transportation services, cosmetics, household goods, clothing, and many others. The purpose of the CPI index is to measure the increase or decrease in the cost of living for consumers. As the CPI index rises, consumers' purchasing costs increase, which affects the purchasing power of their money. The CPI index is used to monitor inflation or the overall rise in prices in the economy. It allows us to assess whether prices are rising too fast or too slowly and to determine what economic policy measures should be taken to offset the adverse effects of inflation.
German CPI unexpectedly fell by more than 1 percentage point to 6.1% year-on-year in May, against forecasts for a slight increase from 7.2% in the previous month. Energy inflation fell sharply from 6.8% in April to 2.6%. This decline may be attributed primarily to a high base effect from the previous year, particularly for natural gas (25.6% compared to 33.8%), firewood and wood pellets (23.8% compared to 29.8%), electricity (12.7% compared to 15.4%), and district heating (11.4% compared to 12.3%). Simultaneously, food prices saw a milder increase of 14.9% compared to the previous gain of 17.2%, with dairy products (28.2% compared to 34.8%) and bread and cereals (19.3% compared to 21.3%) leading the way. Services inflation slowed from 4.7% to 4.5%, with rent experiencing a growth of 1.9% following a 2.0% increase in April. Furthermore, consumer prices experienced a slight monthly decrease of 0.1% in May, marking the first decline in five months.
Source: Tradingeconomics.com
On the one hand, if the reading is higher than expected, inflation is higher, which may favour a fall in the EUR. Meanwhile, it is also a stimulus for the ECB to raise interest rates and reduce the money supply causing an increase in the EUR. On the other hand, if the reading is lower than expected, it may give the ECB an argument to stop its policy of raising interest rates.
Impact: EUR, DAX
Friday 30.06. 09:00 GMT, Eurozone Consumer Price Index (CPI) YoY (June preliminary)
A day after Germany's inflation data, the eurozone is reporting its CPI, in which Germany's data plays a crucial role as the biggest economy in the currency union. Like Germany's data for May, the eurozone's CPI data came in lower than expected at 6.1%.
Energy prices experienced a decrease of 1.8% following a 2.3% increase in April. Moreover, there was a deceleration in the rise of costs for food, alcohol, and tobacco (12.5% compared to 13.5%), non-energy industrial goods (5.8% compared to 6.2%), and services (5.0% compared to 5.2%). Additionally, the core inflation rate, which excludes energy, food, alcohol, and tobacco, dropped to 5.3% in May, marking the lowest level since January.
Source: Tradingeconomics.com
On the one hand, if the reading is higher than expected, inflation is higher, which may favour a fall in the EUR. Meanwhile, it is also a stimulus for the ECB to raise interest rates and reduce the money supply causing an increase in the EUR. On the other hand, if the reading is lower than expected, it may give the ECB an argument to stop its policy of raising interest rates.
Impact: EUR, STOXX, DAX
Friday 30.06. 09:00 GMT, Eurozone Unemployment Rate (May)
The unemployment rate is the percentage of people without a job who are actively seeking employment in the previous month relative to the total number of people of working age or in the labour market. A high unemployment rate means that a large number of people are out of work despite actively seeking employment. A low unemployment rate indicates a stable labour market and greater availability of jobs.
Unemployment rates are important for economic analysis and can affect social and economic aspects. A high unemployment rate is associated with lower incomes and increased poverty, while a low unemployment rate promotes increased wages and social welfare. Governments and policymakers monitor the unemployment rate to assess the effectiveness of employment policies and take action to create jobs and support the unemployed. However, it should be remembered that the unemployment rate is one of many tools for assessing the labour market. Analyzing other indicators, such as the labour force participation rate or wages, is also important.
In April 2023, the seasonally-adjusted unemployment rate in the eurozone saw a slight decrease to 6.5%, reaching the lowest rate ever recorded and aligning with market expectations. This latest figure reflects a decline compared to the rate of 6.7% observed in the previous year, indicating a tight labour market. The number of individuals without employment decreased by 33 thousand from the previous month, reaching 11.088 million, the lowest level since comparable records began in 1995. The youth unemployment rate, which measures job seekers under the age of 25, fell slightly from 14% in March to 13.9% in April. Among the largest eurozone economies, Germany recorded the lowest unemployment rate at 2.9%, while Spain (12.7%), Italy (7.8%) and France (7%) had the highest rates.
Source: Tradingeconomics.com
A higher-than-expected reading may be bearish for the EUR, while a lower-than-expected reading may be bullish for the EUR.
Impact: EUR
Stocks to watch
General Mills (GIS) announcing its earnings results for the quarter ending on 05/2023. Forecast EPS: 1.07. Positive earnings surprise in 8 out of the last 10 reports. Time: Wednesday, June 28, before the market opens.
Nike (NKE) announcing its earnings results for the quarter ending on 05/2023. Forecast EPS: 0.6742. Positive earnings surprise in 10 out of the last 10 reports. Time: Thursday, June 29, after the market closes.
Constellation Brands A (STZ) announcing its earnings results for the quarter ending on 05/2023. Forecast EPS: 2.83. Positive earnings surprise in 7 out of the last 10 reports. Time: Friday, June 30, 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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