The markets are poised to get riled up tomorrow with a series of major economic events during the morning trading hours. Key data comes out from both the UK and the eurozone which, under normal circumstances, would move the markets on their own.
But, with concern over how the economy is evolving and whether we can expect more monetary stimulus from central banks, there is more reason to pay special attention this time around.
Now with earnings season over and the likelihood that the US-China trade war will drag on until next year’s election, economic data is the likely source of market drivers. Let’s go over the major events and have a look at how they could move the market depending on expectations.
French Unemployment Data
The day starts off even before European markets are open with the announcement of the French Unemployment rate. Expectations are for this to improve slightly to 8.5% from last month’s 8.7%. Given the weight of the later data, we wouldn’t expect this release to have a major impact on the markets.
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Just half an hour later at 8:00 CET (02:00 CET,) we get German GDP figures. The key quarterly figure is expected to decline to -0.1% from 0.4% last quarter. This would bring the annualized growth rate to -0.3%, substantially below the 0.6% in the last quarter. It would also bring Europe’s largest economy into a technical recession. Again.
There is a pretty broad consensus that the figures will be bad for Germany. So, we could expect a technical recession to be priced into the market. However, if the quarterly GDP were to contract more than 0.2%, this would make it the worst result in years. And it would be sure to make investors even more nervous. Therefore, we could expect a rather strong relief rally if Germany were to avoid a technical recession.
We can skip the French CPI which is likely to be overshadowed by other figures, and jump to 10:30 CET (04:30 EST) for UK CPI data. This is extra relevant, because the BOE is balancing between keeping rates steady or joining the race to the bottom. The bank itself will be looking to this figure for guidance. Expectations are for monthly CPI to remain stable at 0.0%, which is the same as last month.
On an annualized basis, this would keep it at 2.0% and exactly were the BOE wants it. However, increasing employment and labor costs can provide further upward pressure as we discussed yesterday. Increasing inflation would be expected to strengthen the pound since it would put off action by the BOE, while a miss would cause weakness.
EU Employment Change
We close out the major data for the day at 11:00 CET (05:00 CET) with Euro Area Employment Change and GDP. The latter is not as important this time around. This is because we already got the prelim figures on the 31st, so it would only be relevant if there is a revision of the figures.
With the economy growing below replacement level, employment remains surprisingly resilient. Projections indicate that the employment change will grow at 0.3%, which would be the same as last month. At an annualized growth rate of 1,1%, the figure is also growing below replacement level. Not great, but not terrible.
It could renew calls for the ECB to take action, especially in combination with a disappointing GDP result from Germany.