FXTRADING Economic Data Summary (Asia-Pacific | 07/20)

Eurozone Inflation Continues to Moderate

Eurozone inflation continued to ease in June, with overall price pressures declining noticeably compared with previous months. According to data released by Eurostat, the Eurozone's annual consumer price inflation rate slowed to 2.8% in June from 3.2% in May, while overall European Union inflation also declined from 3.3% to 2.9%. .

Looking at the components, services inflation eased from 3.5% to 3.2%, while core inflation excluding energy slowed from 2.4% to 2.2%. The measure excluding energy, food, alcohol, and tobacco also declined from 2.6% to 2.4%, while inflation for food, alcohol, and tobacco eased from 1.9% to 1.5%.FXTRADING believes that Eurozone inflation is moving closer to the European Central Bank's target, although energy prices remain the largest source of uncertainty. If services and core inflation continue to moderate, the ECB could have greater flexibility in adjusting monetary policy in the future.

Germany's Manufacturing Recovery Continues to Strengthen

Germany's industrial order backlog increased by 1.7% month-on-month in May, marking the largest monthly gain since September 2021, while total outstanding orders climbed to the highest level since the data series began in 2015. This indicates that companies continue to accumulate orders and that market demand has improved significantly, providing solid support for future industrial production.

However, markets also caution that a growing order backlog does not automatically translate into higher output, as companies must still successfully deliver these orders and convert them into actual production. Meanwhile, Germany's industrial production in May exceeded market expectations, while S&P Global data showed that the manufacturing PMI output index remained in expansion territory for a sixth consecutive month in June, indicating that manufacturing conditions continue to improve steadily. FXTRADING believes that Germany's industrial sector is gradually emerging from its previous downturn. The simultaneous improvement in orders, production, and PMI readings has strengthened confidence in the economic recovery, although sustained manufacturing growth will still depend on external demand and companies' ability to execute existing orders.

US Initial Jobless Claims Continue to Decline

According to the US Department of Labor, initial jobless claims for the week ending July 11 fell by 8,000 to 208,000, down from the previous reading of 216,000 and well below market expectations of 218,000. The four-week moving average also declined to 214,250, further indicating that layoffs remain at relatively low levels and that the overall labor market has not shown signs of meaningful deterioration.

For the week ending July 4, continuing claims fell by 16,000 to 1.805 million, while the insured unemployment rate remained unchanged at 1.2%. Although the four-week average of continuing claims edged up slightly to 1.811 million, the overall movement remained limited, suggesting that unemployed workers continue to find new jobs relatively quickly. FXTRADING believes that both the initial and continuing claims data continue to demonstrate the resilience of the US labor market, indicating that the Federal Reserve has little reason to shift its policy stance in the near term due to any significant weakening in employment conditions.

Energy Shock Has Yet to Alter the Bank of England's Policy Direction

Bank of England Deputy Governor Sarah Breeden believes that the UK economy still lacks sufficient momentum, and although rising energy prices have increased uncertainty surrounding inflation, they are not yet enough to justify further monetary tightening. She noted that economic growth remains subdued and that there is still spare capacity in the labor market, making it difficult for higher energy costs to feed through into wages and broader corporate pricing, meaning the conditions for persistent inflation have not yet emerged.

Breeden also stated that tensions in the Middle East have made the outlook for energy prices more uncertain, but monetary policy would only need to respond if rising energy costs evolved into broader and more persistent price pressures. She reiterated that the future direction of energy markets remains highly uncertain and requires continued monitoring. FXTRADING believes that the Bank of England is still inclined to maintain a wait-and-see approach. Against the backdrop of weak economic growth and ongoing inflation risks, policymakers will continue to focus on whether higher energy prices begin to spread into underlying inflation.