The first week of July promises to be hot, and it's not just about the weather. Despite the fact that the USA will celebrate Independence Day, the financial markets will not get a break from the flow of crucial data. The main plot of this summer: are we in for a "soft landing" of the global economy or preparing for a hard landing?
Let's figure out what a trader should watch for this week, and where both opportunities and risks may be hiding.
Scene 1: The main puzzle for the Fed
Let's start with the main headliner — the US economy. This week we will receive the key labor market report for June (Nonfarm Payrolls). Why is this so important? Because the Federal Reserve, when making decisions on rates, looks at two main indicators: inflation and employment.
What are we waiting for? Analysts predict that the economy created 129 thousand new jobs — slightly less than in May. Salary growth is also expected to slow down.
What does this mean? This is the "Goldilocks" scenario or "The Tale of Masha and the Three Bears" that the markets are so eager for. The data is not too hot to scare the Fed with a new wave of inflation, and not too cold to scream about an impending recession. It is a smooth cooling that gives Jerome Powell and his colleagues room to maneuver and possibly for future rate cuts.
But let's not relax. Also this week, the ISM business activity indexes will be released. Here a classic drama will unfold: can the strong services sector offset weakness in industry? If we see that the "illness" from the manufacturing sector spreads to services — that is an alarming bell.
Conclusion on the USA: We are watching the employment report on Friday. "Moderately bad" news will become good news for risk assets, including cryptocurrencies, as it will strengthen expectations for easing Fed policy.
Scene 2: The European dilemma
Moving to the Old World, where the European Central Bank (ECB) has its own headache. This week, inflation data will be released, and they promise to be extremely interesting.
What are we waiting for? Overall inflation in the Eurozone may reach the ECB's target level of 2%. It seems like a victory! But there's a nuance, and its name is core inflation. It is expected to remain "stubbornly" high, at 2.3%.
What does this mean? The ECB finds itself in a stalemate. On one hand, overall inflation is under control. On the other — core inflation, which does not account for volatile food and energy prices, still signals internal price pressure. Add to this weak data from Germany, where industrial orders are likely to show a decline, and you have the perfect recipe for a political deadlock. The ECB cannot confidently lower rates to help the economy for fear of awakening the inflation beast.
Conclusion on Europe: Uncertainty is the key word for Europe. This creates risks for the euro and European assets. For the global investor, it is a reminder that not all regions are recovering equally.
Scene 3: Is the Celestial Empire hitting the brakes?
And now to the main source of concern for the entire global economy — China. This week we will receive data on business activity (PMI), and expectations, to put it mildly, are restrained.
What are we waiting for? Forecasts indicate that the Chinese economy is teetering on the brink of stagnation. The great post-COVID recovery that everyone hoped for has not yet happened.
What does this mean? A weak China is bad news for almost everyone. It means reduced demand for raw materials (from oil to copper), for German cars, and for Australian iron. For global markets, this is a powerful "risk-off" signal — investors become more cautious and move away from risk assets.
Against this backdrop, it will be interesting to look at data from Japan, where the industry, on the contrary, may show good growth. But can the Japanese economy grow when its key neighbor and trading partner is slowing down? The question is open.
Conclusion on Asia: Data from China may be the most important release of the week for global sentiment. Any PMI value significantly below 50 could trigger a wave of selling worldwide.
What is the result? Key points for the trader
This week is not about fireworks, but about gathering intelligence. Investors will be, like sapper, carefully probing the ground, assessing risks.
Remember the three main events for your trading terminal:
Chinese PMIs (beginning of the week): Will set the tone for global sentiment.
Inflation in the Eurozone (mid-week): A test of strength for the ECB.
US employment report (Friday): The main event that could determine Fed rate expectations for months to come.
And don't forget about the "wild cards": speeches from central bank heads at the ECB forum and the approaching deadline for US-China tariffs. Any unexpected statement from there could overshadow all economic forecasts.
For the crypto market, this means one thing: macroeconomics is still at the helm. Pay close attention to the numbers and rhetoric of officials — hidden clues for the next big move are concealed within them. Wishing you a successful and profitable week.