Week Ahead: Economic Indicators (Europe)

Hey Traders.
For the May 19th week, here is a list of all of the major economic indicators being released during the European Session, with a brief synopsis of what they represent and what to possibly expect from the markets in reaction.

Monday
Eurozone CPI
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.
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.

Wednesday
UK CPI
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 the UK. It is calculated using the same method developed by Eurostat, the European Union’s statistical agency, for its harmonised index of consumer prices (HICP). The CPI is the Bank of England’s target inflation measure.
An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. In countries such as the UK, where monetary policy decisions rest on the central bank’s inflation target, the rate of inflation directly affects all interest rates charged to business and the consumer. Inflation is an increase in the overall price level of goods and services.
What to expect:
A higher than expected reading should be taken as positive/bullish for the GBP, while a lower than expected reading should be taken as negative/bearish for the GBP.

Thursday
French, German, Eurozone and UK Manufacturing/Composite/Services PMI
Manufacturing
The Manufacturing Purchasing Managers’ Index (PMI) measures the activity level of purchasing managers in the manufacturing sector. A reading above 50 indicates expansion in the sector; below 50 indicates contraction. Traders watch these surveys closely as purchasing managers usually have early access to data about their company’s performance, which can be a leading indicator of overall economic performance.
Services
The Services Purchasing Managers’ Index (PMI) provides an estimate of service sector business activity for the preceding month by using information obtained from a representative sector survey incorporating transport and communication, financial intermediation, business services, personal services, computing and IT and hotels and restaurants. Results are compiled into a single index which can range between zero and 100.
Composite
The Composite PMI Index measures the activity level of purchasing managers in both sectors (manufacturing and services).
What to expect:
A reading above 50 signals rising activity versus the previous month and the closer to zero the faster is activity contracting. The data are compiled by the Chartered Institute of Purchasing and Supply (CIPS) and Markit.
A higher than expected reading should be taken as bullish, while a lower than expected reading should be taken as bearish.

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.
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.
Current 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.

Friday
UK Retail Sales
Retail sales measure the total receipts at stores that sell durable and nondurable goods. The data include all internet business whose primary function is retailing and also cover internet sales by other British retailers, such as online sales by supermarkets, department stores and catalogue companies. Headline UK retail sales are reported in volume, not cash, terms but are available in both forms. The data are derived from a monthly survey of 5,000 businesses in Great Britain. The sample represents the whole retail sector and includes the 900 largest retailers and a representative panel of smaller businesses, including internet sales. Collectively, all of these businesses cover approximately 90% of the retail industry in terms of turnover.
What to expect:
With consumer spending a large part of the economy, market players continually monitor spending patterns. The monthly retail sales report contains sales data in both pounds sterling and volume. UK retail sales data exclude auto sales.
The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

German GDP
Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period.
GDP is the broadest measure of aggregate economic activity and encompasses every sector of the economy. There are two preliminary estimates which are based on only partial data. The first is the preliminary flash, introduced in April 2016 and limited to just quarterly and annual growth statistics for the region as a whole. This is issued close to the end of the month immediately after the reference period. The second flash report, released about two weeks later, expands on the first to include growth figures for most member states but still provides no information on the GDP expenditure components.
What to expect:
Bond or fixed income markets are contrarians. They prefer weak growth so that there is less of a chance of higher central bank interest rates and inflation. When GDP growth is poor or negative it indicates lacking economic activity. Bond prices will rise and interest rates will fall. When growth is positive and good, interest rates will be higher and bond prices lower. Currency traders prefer healthy growth and higher interest rates. Both lead to increased demand for a local currency. However, inflationary pressures put pressure on a currency regardless of growth.