Saturday, July 20, 2024

Economic Reports that Move the Euro


It can be difficult to figure out which economic reports mean the most for the markets when you’re a trader. Since the eurozone has a handful of member countries, it can be a daunting task to find which ones will move the market. The following are some of the most crucial economic reports you should focus on when trading.

Prices and Inflation

For all currencies, inflation plays a key factor. Countries that have high inflation levels usually suffer from weaker currencies.  At the same time, when the inflation rate is higher than anticipated, the central bank usually hikes key interest rates to control inflation.

Among the reports you should focus on is the consumer price index, which calculates the price of a basket of goods that an average household will likely purchase.

For euro traders, the effect of the CPI data is diminished because of the CPI flash estimate is released two weeks prior the actual data. So, it’s important to view other inflation indicators across various regions.

Confidence and Sentiment

To gauge the economic condition in the eurozone, one can also look at confidence and sentiment reports. One of these reports is the German ZEW survey.

The German ZEW survey is prepared every month by the Center for European Economic Research. It asks more than 350 financial experts where they see the economic going over the medium term. The responses they can use are only positive, no change, or negative.

 A ZEW figure that’s higher than zero means positivity and a number that’s below zero means negativity. If the actual ZEW result is higher than what the market expects, the euro usually strengthens.

Monetary Policy Declarations

Every country’s central bank’s monetary policy decision affects the currency. For the eurozone, the central bank is called the European Central Bank.

Decisions regarding the interest rates coming from the ECB can move the euro significantly. In general, press conferences by the ECB are the most important events to follow. Meanwhile, markets typically anticipate interest rate changes in advance.

Central bank press conferences are important because they provide clues about where the ECB president predicts the economy is headed.

The ECB president may sound “hawkish,” or concerned about inflation. He or she may also sound “dovish,” which means the president believes inflation is tame.

GDP or Economic Growth

Another factor that has significant effect on the euro is the overall economic output of the eurozone. To measure the economic growth and health of an economy, analysts and economists use the gross domestic product (GDP).

The GDP is gross domestic measure of the total value of all the services and goods produced in the eurozone. Growth in the GDP level means the economy is strong and healthy, which is also good for the currency.

The GDP report is released quarter, two months after the end of the subject quarter. This makes the report a lagging indicator of growth. And because economists also use other indicators of the strength of the economy, the GDP figure is anticipated in advance.

Nonetheless, the GDP report is still a very important piece of information for euro traders. That’s especially true if there is a surprise in the actual data.