Traditionally August is a somewhat quieter month after most corporations have announced their second-quarter earnings results, and many enjoy their summer holidays. The Fed's next interest rate decision is also not due until September. Next week, Germany and the US announce their CPI data for July, and the UK publish their first estimates for the second quarter GDP growth.
Tuesday, 08.08. 06:00 GMT, Germany Consumer Price Index (CPI) YoY (July)
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, affecting their money's purchasing power. 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.
Preliminary data for July showed that German consumer price inflation slowed to 6.2% year-on-year, down from 6.4% in the previous month and in line with market expectations. The figure was close to May's 14-month low of 6.1%, indicating a cooling of inflationary pressures in Europe's largest economy. The core rate, which excludes volatile items such as food and energy, also slowed to 5.5%, reinforcing this trend. It's worth noting, however, that both rates remain well above the European Central Bank's target of 2.0%.
There was an easing in goods inflation, which fell from 7.3% to 7.0%, mainly due to a slowdown in food prices (11.0% compared with 13.7%). On the other hand, energy inflation rose from 3.0% to 5.7%. Meanwhile, services prices rose by 5.2% in July, showing little change from the 5.3% increase seen in June. On a monthly basis, consumer prices advanced by 0.3% in July, maintaining the same pace as the previous period.Source: Tradingeconomics.com
On the one hand, if the reading is higher than expected, it may favour a fall in the EUR. Meanwhile, it could also be 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
Thursday, 10.08. 12:30 GMT, US Consumer Price Index (CPI) YoY (July)
The United States inflation data are markedly closer to the 2% target compared to Germany's data. It has also fallen faster than expected for the last four months. In June 2023, the yearly inflation rate in the US decelerated to 3%, marking its lowest level since March 2021. This contrasts the 4% rate recorded in May and slightly below the expected 3.1%. The slowdown may be attributed, at least in part, to the high base effect from the previous year. In 2022, there was a significant surge in energy and food prices, which led to the headline inflation rate reaching its highest point since 1981, at 9.1%. A CPI of 2.8% has been forecast for July 2023.
Source: Tradingeconomics.com
On the one hand, if the reading is higher than expected, it may favour a fall in the USD. Meanwhile, it could also be a stimulus for the Fed to raise interest rates and reduce the money supply causing an increase in the USD. On the other hand, if the reading is lower than expected, it may give the Fed an argument to stop its policy of raising interest rates.
Impact: USD, S&P500, Nasdaq 100
Friday 11.08. 06:00 GMT, UK Gross Domestic Product (GDP) QoQ (2Q)
Gross domestic product (GDP) is an indicator that measures the value of all goods and services produced in a country over a specified period of time, in this case – the second quarter of 2023. GDP is the most commonly used measure of a country's economic activity and is a basic indicator of economic health. GDP considers all types of production, that is, goods and services, produced in the country. This reading measures the change in GDP from the previous quarter, indicating whether the country's economy is growing or slowing down. GDP is also often used to compare the economies of different countries.
The UK GDP growth in the first quarter of 2023 was 0.1%, which was in line with expectations. The same growth has been forecast for the second quarter of 2023, barely keeping above the contraction territory.
Source: Tradingeconomics.com
A higher-than-expected growth rate may be bullish for the GBP, while a lower-than-expected growth rate may be bearish.
Impact: GBP
Stocks to watch
Berkshire Hathaway B (BRKb) announcing its earnings results for the quarter ending on 06/2023. Forecasted EPS: 3.76. Positive earnings surprise in 6 out of the last 10 reports. Time: Monday, August 7.
Eli Lilly (LLY) announcing its earnings results for the quarter ending on 06/2023. Forecasted EPS: 1.99. Positive earnings surprise in 5 out of the last 10 reports. Time: Tuesday, August 8 before the market opens.
Walt Disney (DIS) announcing its earnings results for the quarter ending on 06/2023. Forecasted EPS: 0.9981. Positive earnings surprise in 6 out of the last 10 reports. Time: Wednesday, August 9 after the market closes.
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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