EUR/USD Weekly Forecast – 31 July

Friday, Jul 28 2017

Events that marked the week:

Monday's session brought French and German PMI figures were released. French private sector activity slowed slightly in July, pulling further back from May’s six-year peak but still pointed to a solid start to the second half of the year for the euro zone’s number two economy according to data released on Monday. The preliminary reading of the Markit services purchasing managers’ index came in at 55.9 this month down from 56.9 in June. Economists had forecast an uptick to 56.7. The manufacturing PMI rose to 55.4, compared to expectations for 54.6 and up from 54.8 a month earlier. The composite output index, which measures the combined output of both the manufacturing and service sectors ticked down to 55.7 from 56.6, falling short of expectations for 56.4.

Private sector output in Germany expanded at the slowest pace in six months in July, dampening optimism over the euro zone's largest economy, preliminary data showed on Monday. The overall rate of expansion was the weakest since January, a trend reflected in both manufacturing output and services business activity. The preliminary German manufacturing purchasing managers’ index inched down to a three-month low of 58.3 this month from a final reading of 59.6 in June. Analysts had expected the index to dip to 59.2 in July. The flash services purchasing managers’ index declined to a six-month low of 53.5 this month from 54.0 in June, disappointing expectations for a reading of 54.3.

From Eurozone, on Tuesday, German Ifo business confidence figures were released. German business confidence unexpectedly rose in July, a survey showed on Tuesday, hitting the third record high in as many months as Europe's largest economy powered ahead and morale lifted across industry. The Munich-based Ifo economic institute said its business climate index, based on a monthly survey of some 7,000 firms, rose to 116.0 from 115.2 in June. The reading compared with a Reuters consensus forecast for a value of 114.9.

Friday was marked by German CPI and Spanish CPI figures. The inflation rate in Germany as measured by the consumer price index is expected to be 1.7% in July 2017. Based on the results available so far, the Federal Statistical Office (Destatis) also reports that the consumer prices are expected to increase by 0.4% on June 2017. In July 2017, the harmonised index of consumer prices for Germany, which is calculated for European purposes, is expected to rise by 1.5% year on year and by 0.4% on June 2017.

Separate report on Spanish CPI showed that the annual inflation of the CPI in June 2017 is 1.5%. This indicator provides a preview of the CPI that, if confirmed, would imply a decrease of four tenths in its annual rate, given that in May this change was 1.9%. It is worth nothing in this behaviour the decrease in the prices of fuels (diesel and gasoline/petrol), compared to the increase that they experienced last year. This evolution was also due to the increase in prices of electricity, lower than that of June 2016.

This week markets will be looking at:

CPI Flash Estimate (Monday 11:00)

Spanish Manufacturing PMI (Tuesday 9:15)

Prelim Flash GDP (Tuesday 11:00)

Spanish Unemployment Change (Wednesday 9:00)

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