Week Ahead: Economic Indicators (EU)

Hey, Traders!
For the March 18th 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 18th March
06:00 ET
Eurozone CPI (February)
Eurostat provides statistics for the EU and Eurozone aggregates, individual member states and for the major subsectors. Over the short-term, the central bank focuses on a number of core measures which seek to strip out the most volatile components and so give a much better guide to underlying developments. Amongst these, financial markets normally concentrate upon the narrowest gauge which excludes energy, food, alcohol and tobacco.
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 HICP are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.

Tuesday 19th March
06:00 ET
German ZEW (March)

• Economic Sentiment
  The ZEW Indicator of Economic Sentiment is calculated from the results of the ZEW Financial Market Survey. The ZEW is followed closely as a precursor and predictor of the Ifo Sentiment Survey and as such is followed closely by market participants. The data is released around the middle of the month for the current month. The survey provides a measure of analysts’ view of current economic conditions as well as a gauge of expectations about the coming six months. The latter measure tends to have the larger market impact and reflects the difference between the share of analysts that are optimistic and the share of analysts that are pessimistic. About 350 financial experts take part in the survey.
• Current Conditions
  This survey summarizes the net percentage of positive and negative responses regarding the expectations for economic growth in the next 6 months, as given by financial analysts from banks, insurance companies and large industrial enterprises. For example, if 50% believe that the economic situation will improve and 20% believe it will get worse, the result will be +30.
  The survey deals with the markets of Germany, the USA, Japan, Great Britain, France, Italy and other EU countries.

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.

Wednesday 20th March
03:00 ET
UK CPI (February)
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 methodology 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..
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.

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 21st March
04:15 – 05:30 ET
Euro-area and UK PMI (March)

• Manufacturing
  In the Euro Area, the Markit Manufacturing Purchasing Managers’ Index measures the performance of the manufacturing sector and is derived from a survey of 3,000 manufacturing firms. National data are included for Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece. These countries together account for an estimated 90% of Eurozone manufacturing activity. The Manufacturing Purchasing Managers Index is based on five individual indexes with the following weights: New Orders (30 percent), Output (25 percent), Employment (20 percent), Suppliers’ Delivery Times (15 percent) and Stock of Items Purchased (10 percent), with the Delivery Times index inverted so that it moves in a comparable direction. A reading above 50 indicates an expansion of the manufacturing sector compared to the previous month; below 50 represents a contraction; while 50 indicates no change.

• Services
  The Eurozone Services PMI (Purchasing Managers’ Index) is based on data collected from a representative panel of around 2,000 private service sector firms. National services data are included for Germany, France, Italy, Spain and the Republic of Ireland. The index tracks variables such as sales, employment, inventories and prices. A reading above 50 indicates that the services sector is generally expanding; below 50 indicates that it is generally declining.

• Composite
  In the Euro Area, the Markit Eurozone PMI Composite Output Index tracks business trends across both the manufacturing and service sectors, based on data collected from a representative panel of over 5,000 companies (60 percent from the manufacturing sector and 40 percent from the services sector). The index tracks variables such as sales, new orders, employment, inventories and prices. National data are included for Germany, France, Italy, Spain, Austria, the Netherlands, Greece and the Republic of Ireland. A reading above 50 indicates expansion in business activity and below 50 indicates that it is generally declining.

What to expect:
A higher than expected reading should be taken as bullish for the GBP/EUR whilst a lower figure should be taken as bearish.

04:30 ET
Swiss Interest Rate
Swiss National Bank (SNB) governing board members come to a consensus on where to set the target range for the rate. Traders watch interest rate changes closely as short term interest rates are the primary factor in currency valuation.
What to expect:
A reading that is stronger than forecast is generally supportive (bullish) for the CHF, while a weaker than forecast reading is generally negative (bearish) for the CHF.

08:00 ET
BoE Bank Rate Decision
The Bank of England’s monetary policy committee members vote on where to set the rate.
What to expect:
It could have an effect on businesses for the sudden change in the cost of credit on their corporate balance. Consumers could also be affected since the shifts in Monetary policy influence other short-term rates like Bank deposits, personal loans, credit cards, home equity loans and adjustable-rate mortgages. Higher rates might make banks more reluctant to borrow overnight funds, so might lend out less money or charge businesses and consumers a higher rate to offset the rates.

The pound might rally if the BoE is showing an inclination to raise interest rates. How much the pound might move depends on if the Foreign Exchange Markets have taken these hikes into consideration. If they have taken it into consideration then the dollar movement may be minimal.

Friday 22nd March
03:00 ET
UK Retail Sales (February)
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:
Retail sales not only give you a sense of the big picture, but also the trends among different types of retailers. Perhaps apparel sales are showing exceptional weakness but electronics sales are soaring. These trends from the retail sales data can help you spot specific investment opportunities, without having to wait for a company’s quarterly or annual report.

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.

05:00 ET
German IFO (March)

• 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.

• 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.

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.

Have a great week!