The inflation rate in Germany as measured by the consumer price index is expected to be +0.1% in May 2016. Based on the results available so far, the Federal Statistical Office (Destatis) also reports that the consumer prices are expected to increase by 0.3% on April 2016. The harmonised index of consumer prices for Germany, which is calculated for European purposes, is expected to remain unchanged in May 2016 year on year. Compared with April 2016, it is expected to increase by 0.4%.

Tuesday was marked by German Unemployment Change, M3 Money Supply and CPI figures. German unemployment declined more than economists estimated, pushing the jobless rate to the lowest level since reunification. The number of people out of work fell by a seasonally adjusted 11,000 to 2.695 million in May, data from the Federal Labor Agency in Nuremberg showed on Tuesday. The median estimate in a Bloomberg survey was for a decline of 5,000. The jobless rate dropped to 6.1 percent. “The labor market continues to develop positively,” Frank-Juergen Weise, president of the labor agency, said in a statement, noting that unemployment declined even as a seasonal pickup in hiring comes to an end. “Employment has grown strongly and demand for labor has increased significantly.”

Separate report showed that the annual growth rate of the broad monetary aggregate M3 decreased to 4.6% in April 2016, from 5.0% in March, averaging 4.9% in the three months up to April. Analysts were predicting no change. The components of M3 showed the following developments. The annual growth rate of the narrower aggregate including currency in circulation and overnight deposits (M1) decreased to 9.7% in April, from 10.1% in March. The annual growth rate of short-term deposits other than overnight deposits (M2-M1) was more negative at -2.8% in April, from -2.4% in March. The annual growth rate of marketable instruments (M3-M2) was more negative at -1.6% in April, from -1.0% in March.

Euro area annual inflation is expected to be -0.1% in May 2016, up from -0.2% in April, according to a flash estimate from Eurostat, the statistical office of the European Union. This was in line with market forecasts .Looking at the main components of euro area inflation, services is expected to have the highest annual rate in May (1.0%, compared with 0.9% in April), followed by food, alcohol & tobacco (0.8%, stable compared with April), non-energy industrial goods (0.5%, stable compared with April) and energy (-8.1%, compared with -8.7% in April).

On Wednesday, Spanish Manufacturing PMI data was released from Eurozone. Although the health of the Spanish Manufacturing sector continued to strengthen in May, the latest improvement was the weakest in seven months amid slower rises in output, new orders and employment. Meanwhile, input prices increased for the first time since August last year, but firms continued to lower their output charges. The seasonally adjusted Markit Spain Purchasing Managers’ Index  dipped to 51.8 in May from 53.5 in April, its lowest level since October 2015 and thereby signalling a weaker improvement of business conditions in the sector.

Focus of Thursday's session was on ECB interest rate decision and the following Press Conference. As it was widely expected ECB left interest rates unchanged at today's meeting in Vienna. ECB left its headline interest rate at record low of zero. The bank held the deposit rate at -0.4% and the marginal lending facility at -0.25% at its monetary policy meeting. The ECB revised its inflation forecast for 2016 up to 0.2% from 0.1% before, but kept its inflation forecasts for 2017 and 2018 at 1.3% and 1.6% respectively. Draghi warned that inflation in the euro area is likely to remain very low, or negative, for some time.

The central bank raised its growth forecast for 2016 to up to 1.6%, from 1.4%, but left its forecasts for the following two years unchanged. Draghi said the economic recovery is proceeding ‘gradually’, but warned that the risks to the global economy are to the downside, citing the June 23 U.K. referendum on European Union membership. Draghi said the ECB believes that Britain should stay in the EU, but added that it was ready for any outcome.

This week markets will be looking at:

German Factory Orders (Monday 08:00)