Key economic events for week 28: What to watch

05 July 2024

Paul Reid

Financial Journalist at Exness

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Let's take a look at the coming fundamental reports and events that might disrupt the charts next week.

Next week (week 28) will host significant economic events that could drive the markets and influence trading decisions. Here’s a detailed look at the key events traders should monitor, including potential outcomes and market reactions.

Monday, July 8

Eurozone Sentix Investor Confidence (08:30 GMT)

This index measures investor confidence in the Eurozone economy by assessing the relative six-month economic outlook for the Eurozone. It’s compiled from a survey of approximately 2,800 investors and analysts. A higher-than-expected reading may boost the Euro, while a lower reading could weaken it.

Last month, the index was lower than expected, leading to a temporary dip in EURUSD. Eurozone Sentix Investor Confidence has been gradually recovering and reached +0.3 in June 2024, its highest level since February 2022. Investors are likely concerned about current economic prospects because of an uncertain outlook and higher ECB interest rates, affecting demand and factory activities.

The most recent release was on 10 June 2024. The actual reading was +0.3, improving from the previous reading of -3.6 In May 2024, the index stood at -3.6, and in April 2024, it was -5.9.

A reading above zero indicates optimism in the euro zone’s economic outlook, while a reading below zero suggests pessimism. When the index surprises positively (higher than expected), it’s considered bullish for the EUR. Conversely, a lower-than-expected reading is bearish for the EUR.

Given recent economic headwinds, investor confidence might remain subdued. If the reading is lower than expected, we could see EURUSD testing lower support levels, especially if compounded by other weak data points from the Eurozone during the week.

Tuesday, July 9

China CPI (01:30 GMT)

As an indicator of inflation, a higher CPI can signal economic overheating, potentially leading to tighter monetary policy. This can affect commodities like gold and oil, which China heavily consumes. Previous readings have shown moderate inflation, which has supported commodity prices. China's recent economic policies aim to stabilize growth amid trade tensions and slowing global demand.

In May 2024, the CPI in China decreased slightly to 102.90 points from 103.00 points in April. The average CPI from 2021 to 2024 was 102.44 points, with a record high of 104.20 points in February 2024 and a record low of 100.20 points in June 2021.

A rising CPI suggests inflation, which can affect currency values and monetary policy decisions. Inflationary pressures may affect investor sentiment. Geopolitical tensions and supply chain disruptions could shift prices. Positive surprises in CPI data may boost market confidence. Consider the impact on the Chinese yuan (CNY) and related assets.

Inflation is likely to remain a concern given the global economic environment. A higher CPI might lead to a rally in commodities like gold (XAUUSD) as investors seek safe havens. Conversely, a lower CPI could pressure commodity prices, reflecting weaker economic activity.

US Wholesale Inventories (14:00 GMT)

This data can signal economic activity levels. High inventories may indicate slowing demand, potentially bearish for USD.

In the previous report, US wholesale inventories increase by 0.6% month-over-month, significantly higher than the forecast of 0.1%, reaching $901.6 billion. This is the most substantial increase since November 2022 and significantly higher than the forecast of 0.1%.

Durable goods inventories rose by 0.5%, following a 0.6% increase in April. Nondurable goods inventories rebounded by 0.6%, recovering from a 0.4% decline in the previous month. Year-on-year, wholesale inventories were down by 0.5%.

Wholesale inventories reflect the stock of unsold goods held by wholesalers. A high inventory level may signal an economic slowdown, while a low reading suggests stronger growth. With recent fluctuations in consumer spending and supply chain disruptions, wholesale inventory levels will gauge economic momentum so keep one eye on those.

Wednesday, July 10

UK GDP (06:00 GMT)

Gross Domestic Product (GDP) overall growth indicates economic health. A strong number for June could boost GBP, while a weaker figure could undo recent progress. Market consensus suggests that we’ll likely see another expansion, following January’s +0.3% and February’s +0.1% growth.

The UK's economy continues to face Brexit-related uncertainties, inflationary pressures, and a change of government. Volatility will increase from several verticals making GBP-related assets very hard to forecast. Trade with caution, especially if you leave orders open overnight.

US Crude Oil Inventories (14:30 GMT)

This report affects oil prices directly. A larger than expected inventory build can depress oil prices, while a draw can support them. Recent reports of large inventory builds have put pressure on USOIL prices.

US commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 3.591 million barrels from the previous week, reaching 460.7 million barrels. This level is approximately 2% below the five-year average for this time of year. The Energy Information Administration (EIA) closely monitors these inventories to assess supply and demand dynamics in the oil market.

Crude oil inventories impact petroleum product prices and can influence inflation. A larger-than-expected increase in inventories suggests weaker demand and often proves bearish for crude oil prices. Conversely, a smaller-than-expected increase or a decline in inventories indicates greater demand and is bullish for crude oil prices.

Given the current global supply constraints and geopolitical tensions, oil inventory data will be critical in determining short-term price trends. With global economic uncertainty, oil prices have been volatile. An unexpected inventory draw could see USOIL prices rallying above recent resistance levels. However, a significant build might push prices down to test support.

Thursday, July 11

ECB Monetary Policy Meeting Accounts (11:30 GMT)

The Monetary Policy Accounts cover the meetings of the Governing Council for the ECB, which are typically held every six weeks. The accounts provide a review of economic developments. They outline various policy options considered during the meetings. Hawkish comments could boost the Euro, while dovish comments might weaken it. The last meeting indicated a dovish stance, leading to a EURUSD sell-off.

The recent surge in global inflation will affect the ECB’s decisions. If inflation continues to rise, the ECB might consider tightening monetary policy. The ongoing pandemic and potential variants pose risks to economic recovery. Any signs of slowdown could influence the ECB’s stance. Sudden market movements can affect policy decisions. Watch out for unexpected events that might create volatility.

If the ECB maintains or expands its stimulus measures, it could support economic growth and boost market sentiment.

Friday, July 12

Germany CPI (06:00 GMT)

As the largest economy in the Eurozone, Germany's CPI significantly affects Euro strength. The previous CPI reading showed rising inflation, briefly supporting the Euro before global concerns took over. Germany's industrial output and consumer sentiment are powerful indicators.

Expect to see an inflation rate in Germany of around +2.2% in June 2024. This measurement reflects the change in the consumer price index (CPI) compared to the same month a year earlier. Inflation eased for goods, with a fall in energy costs offsetting a faster rise in food prices. Meanwhile, services inflation remained steady at 3.9%.

A higher CPI might lead to expectations of tighter ECB policies, which might boost the Euro in the short and long term.

Conclusion

Economic reports often cause short-term market fluctuations. While these releases can provide valuable insights, it’s crucial to focus on broader trends and long-term fundamentals. Don’t let short-term volatility mislead your trading strategy. Always consider the overall economic context and market sentiment.

Scalpers and day traders can benefit from economic releases. They thrive on short-term volatility and can use these reports to capture quick profits. However, it’s important for them to stay disciplined and have a solid risk management strategy, as these events can also lead to unpredictable market swings.

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