January 28, 2023

Eurozone inflation reaches a new record high

LQDFXperts Features | Eurozone inflation reaches a new record high

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While the US has seen headline inflation fall, Eurozone inflation has continued to increase, hitting a 25-year high of 8.9% year-on-year in July. 

The Russian invasion of Ukraine has disrupted energy and food markets, causing prices to spike. Countries most affected by high inflation had to replace sanctioned trading goods from neighbouring Russia with EU or overseas imports. 

The UK follows the trend, as its inflation rate has surged to a 40-year-high of 10.1 per cent in July. 

Every corner of the continent is facing rising prices. While the war in Ukraine dramatically worsens the outlook, the prices of many commodities have also been growing since the COVID-19 pandemic began. Lockdowns, first introduced two years ago, strained global supply chains, left crops to rot and caused panic-buying in supermarkets.

Investors this week await Powell’s speech in Jackson Hole on Friday for possible answers about how high U.S. interest rates may go and how long they will need to stay at elevated levels to bring inflation back under control.

Fed policymakers have already reiterated that there is still a way to go in their inflation fight and feel there has been little evidence so far that inflation pressures are subsiding.

What to watch the week ahead for clues about Eurozone inflation (and more) 

August flash PMIs that are in full focus this week will offer updates on economic conditions at the crossroads of weakening global demand and intensifying inflation.

The Eurozone will release PMI data for August on Tuesday that will be closely watched after July’s composite PMI dipped below 50, pointing to a contraction in business activity. The bloc is also to release data on consumer confidence for August later on the day. The UK is to publish PMI data on Tuesday too. 

Market watchers will also be looking at Thursday’s minutes of the European Central Bank’s July meeting for insight on how large of a rate hike to expect in September.

The US economic calendar for the coming week features July figures on personal income and spending, which includes the personal consumption expenditures price index, the Fed’s preferred measure of inflation. Also, the second Q2 GDP estimate will be closely monitored.

Tuesday 23 August

Japan au Jibun Bank Flash PMI, Manufacturing & Services* (Aug)

UK CIPS/S&P Global Flash PMI, Manufacturing & Services* (Aug)

Germany S&P Global Flash PMI, Manufacturing & Services* (Aug)

France S&P Global Flash PMI, Manufacturing & Services* (Aug)

Euro Area S&P Global Flash PMI, Manufacturing & Services* (Aug), Consumer Confidence Flash (Aug)

US S&P Global Flash PMI, Manufacturing & Services* (Aug), New Home Sales (Jul)

Wednesday 24 August

United States MBA Mortgage Applications (Aug), Durable Goods Orders (Jul), Pending Home Sales (Jul)

New Zealand Retail Sales (Q2)

Thursday 25 August

Germany GDP Growth Rate (Q2), Ifo Business Climate (Aug)

ECB Monetary Policy Meetings Account

Canada Average Weekly Earnings (Jun)

United States GDP Growth Rate (Q2), GDP Price Index (Q2)

Friday 26 August

Germany GfK Consumer Confidence (Sep)

United States Core PCE Price Index (Jul), Goods Trade Balance (Jul), Michigan Consumer Sentiment (Aug), Jackson Hole Symposium

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