Global Economiv Outlook: Data Heavy Week and Implications of Middle Eastern Conflict.

GBP: The UK’s economic landscape is deteriorating, which is likely to affect credit lending conditions. The high inflation and interest rates are squeezing disposable income. Moreover, a weakening housing sector and uncertain job market conditions could restrict loan availability. This combination of tighter credit conditions and declining disposable income may dampen consumer spending. Given that UK private consumption accounts for over 60% of the country’s economy, a spending slowdown could significantly strain the UK economy.

USD: In the upcoming week, the Dallas Fed Manufacturing Index will be closely watched by investors. While the US manufacturing sector contributes less than 30% to the US economy, investors are likely to scrutinize forward-looking indicators within economic reports, such as trends in new orders, prices, and employment. Any early signs of weakness in the US economy could stoke fears of a recession. Apart from economic data, news from Capitol Hill regarding the Middle East conflict will influence market sentiment. Increased US military presence in the region may weaken USD currency crosses, although a signal of a “soft landing” could boost investor confidence. Investors should also keep an eye on employment and price-related data.

EUR: On Monday, the focus shifts to the German economy, with Q3 GDP and October inflation figures drawing investor attention. The third-quarter GDP performance will play a crucial role in determining appetite for the EUR/USD. A significant contraction in the German economy could exert downward pressure on the EUR. A prolonged German economic recession might also limit the ECB’s ability to sustain higher interest rates. A worsening macroeconomic environment could affect the job market and disposable income, potentially easing inflationary pressures driven by demand. Economists are forecasting a 0.7% year-over-year contraction in the German economy for the third quarter, with a 0.3% quarter-on-quarter contraction expected.

Economic Calendar