EU, EU Week Ahead, Week Ahead

Week Ahead: Economic Indicators (Europe)

Hey, Traders!
For the January 27th week, here is a list of all of the major economic indicators being released during the EU Session, with a brief synopsis of what they represent and what to possibly expect from the markets in reaction.


Monday 27th January
04:00 ET
German IFO Business Climate
The German Ifo Business Climate Index rates the current German business climate and measures expectations for the next six months. It is a composite index based on a survey of manufacturers, builders, wholesalers and retailers. The index is compiled by the IFO Institute for Economic Research.

German IFO Expectations
German Business Expectations rates the expectations of businesses in Germany for the following six months. It is a sub-index of the German Ifo Business Climate Index.

German IFO Currrent Conditions
The German Current Assessment rates current business conditions in Germany, without considering future expectations. It is a sub-index of the German Ifo Business Climate Index.

What to expect:
A higher than expected reading should be taken as positive/bullish for the EUR, while a lower than expected reading should be taken as negative/bearish for the EUR.


Thursday 30th January
01:30 ET
French GDP Prelim
Gross Domestic Product (GDP) measures the total value of a country’s industrial output over a given period. It consists of the aggregate domestic production of goods and services by individuals, businesses, and government. Quarterly publications provide a much more detailed picture of the economy than the monthly indicators, covering all of gross domestic product (GDP), sector accounts, business investment, balance of payments, consumer trends, and profitability of French companies.

What to expect:
Low levels of growth are negative to most asset classes and are common to recessionary cycles. Currency, equities, and commodities markets all exhibit enhanced degrees of volatility surrounding the GDP release.

04:00 ET
German GDP Flash
Gross Domestic Product (GDP) measures the total value of a country’s industrial output over a given period. It consists of the aggregate domestic production of goods and services by individuals, businesses, and government. Quarterly publications provide a much more detailed picture of the economy than the monthly indicators, covering all of gross domestic product (GDP), sector accounts, business investment, balance of payments, consumer trends, and profitability of German companies.

What to expect:
Low levels of growth are negative to most asset classes and are common to recessionary cycles. Currency, equities, and commodities markets all exhibit enhanced degrees of volatility surrounding the GDP release.

05:00 ET
Eurozone GDP Prelim Flash
Gross Domestic Product (GDP) measures the total value of industrial output over a given period. It consists of the aggregate domestic production of goods and services by individuals, businesses, and government. 

What to expect:
GDP QoQ is a leading indicator of EU economic health. High levels of GDP growth are viewed as being positive for EU indices as well as the Euro. 

Eurozone Unemployment Rate
The unemployment rate measures the number of unemployed as a percentage of the labor force

What to expect:
Unemployment data is closely monitored by the financial markets. These data give a comprehensive report on the state of the economy and its future direction. A rising unemployment rate can be a warning sign of hard times, while a low rate can be a warning of inflation as wages are bid up to attract labor.

08:15 ET
ECB Interest Rate
The European Central Bank (ECB) sets monetary policy for all members of the Eurozone. The highest decision-making body is the Governing Council which comprises the six members of the Executive Board and the 19 presidents of member central banks. Policy meetings take place roughly every six weeks but, due to the sheer number of participants, a rotation system has been introduced so that the total number of votes is capped at twenty-one.
The most traditional operations are what we call the Main Refinancing Operations (MRO). When liquidity is needed, a bank can borrow directly from the ECB. Every week, banks of the Eurozone go (virtually) to the ECB desk to borrow money at the refinancing rate fixed by the ECB. The loan is made under the form of a Repurchase Operation (Repo). The bank sells security assets to the ECB and borrows money. One week later, the bank gives the money back with interest to the ECB and recovers its security assets.

What to expect:
The level of interest rates affects the economy. Higher interest rates tend to slow economic activity; lower interest rates stimulate economic activity. Either way, interest rates influence the sales environment. In the consumer sector, few homes or cars will be purchased when interest rates rise. Furthermore, interest rate costs are a significant factor for many businesses, particularly for companies with high debt loads or who have to finance high inventory levels. This interest cost has a direct impact on corporate profits. The bottom line is that higher interest rates are bearish for the stock market, while lower interest rates are bullish.


Friday 31st January
02:45 ET
French HICP
The Harmonized Index of Consumer Prices is an index of consumer prices, on the basis of a statistical methodology that has been harmonised across all EU member states.
The consumer price index (CPI) is an average measure of the level of the prices of goods and services bought for the purpose of consumption by the vast majority of households in France.

What to expect:
By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.

03:55 ET
German Unemployment Rate
The unemployment rate is calculated by the Federal Employment Agency based on the number of unemployed persons as a percentage of the number of all civilian members of the labour force (dependant civilian employed persons, the self-employed family workers and unemployed).

What to expect:
If labour markets are tight, investors will be alert to possible inflationary pressures that could exist. If wage inflation threatens, it’s a good bet that interest rates will rise; bond and stock prices will fall. In contrast, when job growth is slow or negative, then interest rates are likely to decline – boosting up bond and stock prices in the process.

08:00 ET
German HICP
The Harmonized Index of Consumer Prices is an index of consumer prices, on the basis of a statistical methodology that has been harmonised across all EU member states.
The consumer price index (CPI) is an average measure of the level of the prices of goods and services bought for the purpose of consumption by the vast majority of households in Germany.

What to expect:
By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.