German wholesale prices fell by the largest amount since June 2020. However, wholesale prices saw a less severe decline in the month. Next up, trade.
It is a relatively busy day ahead on the European economic calendar. German wholesale inflation figures were in focus this morning. The weak demand environment has weighed on output prices, sparking fears of a deeper ECB-fueled economic recession.
German wholesale inflation figures provided little comfort. In June, the German wholesale price index fell by 2.9% year-over-year versus a forecasted 1.2% decline. Wholesale prices declined by 2.6% in May.
According to Destatis,
While the wholesale price index fell just 0.2% in June, month-on-month, the latest report gives the ECB more food for thought as demand continues to impact pricing.
Ahead of the German wholesale inflation numbers, the EUR/USD fell to an early low of $1.12135 before rising to a pre-stat high of $1.12432.
However, in response to the wholesale inflation numbers, the EUR/USD rose from $1.12193 to a post-stat high of $1.12255.
This morning, the EUR/USD was down 0.02% to $1.12247.
Later today, Eurozone trade data will also move the dial. While the Fed looks set to end its monetary policy tightening cycle, the ECB looks set to continue beyond the summer.
However, US economic indicators have eased fears of a US recession, contrasting with the euro area macroeconomic environment.
Earlier this week, trade data from China suggests deteriorating global trade terms. Economists forecast the Eurozone trade deficit to narrow from €11.7 billion to €7.6 billion in May.
ECB commentary will also need consideration. ECB Executive Board Member Luis de Guindos is on the calendar to speak today with investors looking for post-summer forward guidance.
It is a relatively busy day on the US economic calendar. US import and export price numbers for June will draw interest ahead of prelim Michigan Consumer Sentiment figures.
With inflation the hot topic of this week, we expect the import and export price index figures to garner more interest than usual. However, the Michigan Consumer Sentiment Report will have more impact. Economists forecast the Michigan Consumer Sentiment Index to increase from 64.4 to 65.5 in July.
This week, the US CPI Report, Producer Price Index numbers, and jobless claims impacted sentiment toward the Fed monetary policy outlook.
According to the CME FedWatch Tool, the probability of a 25-basis point July Fed rate hike was 92.4% versus 94.2% on Wednesday. Significantly, the chances of the Fed lifting rates to 5.75% in September stood at 11.1%, down from 13.2% on Wednesday.
With over 28 years of experience in the financial industry, Bob has worked with various global rating agencies and multinational banks. Currently he is covering currencies, commodities, alternative asset classes and global equities, focusing mostly on European and Asian markets.