CPI inflation in the euro area, decisions by the central banks of England and Australia, and data on the state of the labour market in the US - these events are likely to capture investors' attention in the first week of August, affecting, among other things, exchange rates, which were particularly surprised by the change in trend after a much better GDP reading from the United States. As a result, the EUR/USD pair fell by more than 1%, even despite a rate hike in the euro area, which did not help the currency to strengthen.
Monday, 31.07, 9:00 GMT, Eurozone CPI inflation (preliminary data July)
CPI (Consumer Price Index) inflation is an indicator that measures changes in the prices of goods and services used by households. It is used to monitor the rise in the overall price level in the economy and the impact of these changes on the purchasing power of money. Central banks and economists use the CPI to make monetary policy decisions and adjust cost-of-living payments.
The latest inflation reading for the euro area showed a continuation of the decline in the rate of price increases, falling to 5.5%. This appears to have been driven by a 0.6% reduction in transport costs compared to a year earlier and a slowdown to 2.5% in house price and cost of living growth compared to the previous reading of 4.1%. Analysts are now predicting that inflation may fall to 5.2%.
Source: Tradingeconomics.com
A higher than expected reading could be bullish for the EUR, while a below expected reading could be bearish for the EUR.
Impact: EUR
Tuesday, 1.08, 4:30 GMT, interest rate decision in Australia
The Reserve Bank of Australia kept interest rates at 4.1% at its last meeting. The board said it needed more time to assess the impact of earlier increases and acknowledged that inflation in the country had peaked, as evidenced by the 5.6% drop in the monthly CPI in May. Nevertheless, inflation in Australia remained high at 6.0% in the second quarter of 2023. Despite the recent pause, analyst consensus expects another 25bp hike.
Source: Tradingeconomics.com
A higher than expected reading could be bullish for the AUD, while a below expected reading could be bearish for the AUD.
Impact: AUD
Tuesday, 1.08, 7:55 GMT, Germany manufacturing PMI (July)
The German PMI provides insight into the level of industrial activity reported by purchasing managers. The measure provides insights into the state of the German economy, as purchasing managers are assumed to have 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 latest readings are not encouraging, falling to 40.6, which is the lowest since June 2020. Analysts are now forecasting a further drop to 38.8, which would mean a mere 4 points closer to the pandemic's bottom reading. This means that expectations in the German economy are particularly bad.
Source: Tradingeconomics.com
A higher than expected reading could be bullish for the EUR, while a below expected reading could be bearish for the EUR.
Impact: EUR
Thursday, 3.08, 11:00 GMT, UK interest rate decision
On Thursday, we will learn a key decision from the Bank of England. Following a series of 25bp rate rises by the Fed and the ECB, analysts expect a similar move in the UK, where current rates stand at 5% with inflation at 7.9%. Analysts' consensus is for another 25bp hike.
Source: Tradingeconomics.com
A higher than expected reading could be bullish for the GBP, while a below expected reading could be bearish for the GBP.
Impact: GBP
Friday, 4.08, 12:30 GMT, US non-farm employment and unemployment (July)
The unemployment rate is the percentage of people without work who actively sought 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 unemployed despite actively seeking employment. A low unemployment rate indicates a stable labour market and greater availability of full-time jobs.
Unemployment rates and the level of employment in the non-agricultural sector 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 higher wages and social welfare. Governments and policy makers monitor the unemployment rate to assess the effectiveness of employment policies and take action to create jobs and support the unemployed. However, it is important to remember that the unemployment rate is just one of many tools used to assess the labour market. It is also important to analyse other indicators, such as the labour force participation rate or wage levels.
Among other factors, the Fed's decisions may be influenced by worse-than-expected US employment readings. Such data will put pressure on the US central bank towards a possible first interest rate cut. It should be recalled here that we are currently experiencing historically high employment levels, which speaks volumes about the strength of the US economy. Analysts' consensus is for the unemployment rate to remain at 3.6%.
Source: Tradingeconomics.com
A higher than expected reading could be bearish for the USD, while a below expected reading could be bullish for the USD.
Impact: USD
Stocks to watch
Pfizer (PFE) announces financial results for Q2 ending June 2023. Forecast EPS: 0.5733. Positive earnings surprise in 9 of last 10 reports. Deadline: Tuesday, 1 August, before the market opens.
AMD (AMD) announces financial results for Q2 ending June 2023. Forecast EPS: 0.5739. Positive earnings surprise in 9 of last 10 reports. Deadline: Tuesday, 1 August, after market close.
Apple (AAPL) announces financial results for Q2 ending June 2023. Forecast EPS: 1.19. Positive earnings surprise in 9 of last 10 reports. Deadline: Thursday, 3 August, after market close.
Amazon.com (AMZN) announces financial results for Q2 ending June 2023. Forecast EPS: 0.3537 Positive earnings surprise in 7 of last 10 reports. Deadline: Thursday, 3 August, after market close.
Grzegorz Dróżdż, CAI MPW, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
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