ECB and Euro 2

German inflation remained unchanged this month and above the ECB price stability target; lower optimism seen in the euro zone industry and retail sectors

Jul 31 • Morning Roll Call • 74 Views • No Comments

On Monday the investors were keeping a close eye on the German annual inflation reading, where the results came as expected in July and remained above the ECB price stability target. The German consumer prices rose by 2.1% year-on-year basis, which was in line with the analysts’ expectations but above the European Central Bank target of close to but below the 2%. The data we have seen yesterday may support the gradual winding down of ECB monetary stimulus.

More news came from the Euro zone yesterday, with the economic sentiment seen lower this month. The sentiment was influenced by the lower optimism shown from the overall industry and retail sectors. According to Reuters, the Commission survey showed a down trend continuing with the economic sentiment of the euro zone easing to 112.1 points in July, compared to 112.3 in the previous month, while the business climate indicator dropped to 1.29 this month from 1.38 in June. The trade tensions between the EU and the US, of course had an effect on the sentiment with managers having less optimistic views on their export orders.

Another critical factor for the EU is the issue of Brexit, where on Monday Great Britain has warned the EU negotiators of the obstacles European companies may face while working in Britain if London will not be allowed to operate in the European Union under current conditions. As the Guardian has reported, around seven thousand European based investment funds would be affected by the regulations. During last week, Michel Barnier, chief negotiator for the EU and Dominic Raab, Brexit minister, have met and discussed the future of the financial market, where they have agreed that the market access would be governed by sovereign decisions of both sides. As a reminder, Prime Minister, Theresa May has accepted the legal mechanism ‘equivalence’ where the EU considers a country’s rules to be as vigorous and its own, however the critics of the current regime see this move as a loss of access to the European Union market and it is still a question of how the relationship between the UK and EU will work.

ECONOMIC CALENDAR EVENTS FOR JULY 31th

NZD Building Consents m/m
NZD ANZ Business Confidence
AUD Building Approvals m/m
JPY BOJ Outlook Report
JPY BOJ Policy Rate
JPY Monetary Policy Statement
JPY BOJ Press Conference
EUR German Retail Sales m/m
EUR Spanish Flash GDP q/q
EUR CPI Flash Estimate y/y
EUR Core CPI Flash Estimate y/y
EUR Prelim Flash GDP q/q
CAD GDP m/m
CAD RMPI m/m
USD Core PCE Price Index m/m
USD Employment Cost Index q/q
USD Personal Spending m/m
USD CB Consumer Confidence

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