FXTRADING Economic Data Summary (Asia-Pacific | 07/22)

Germanys Economic Recovery Outlook Continues to Improve

Germany‘s ZEW Economic Sentiment Index rose from 10.5 to 26.3 in July, well above the market expectation of 15.1 and marking its highest level since February this year. The Current Situation Index also improved from -81.0 to -77.6. Although it remained in negative territory, the reading suggested that the depth of the economic slowdown has eased. Overall, investor confidence in Germany’s economic outlook strengthened noticeably, reinforcing expectations that the economy is gradually stabilising.

Across sectors, machinery, construction, chemicals, pharmaceuticals and metals all showed improvement, with export-oriented industries and domestic demand-related sectors providing the main support for rising confidence. However, the automotive sector continued to weaken and remained a key drag on Germany‘s economy. FXTRADING Analysis believes that the continued improvement in investor sentiment reflects growing optimism about Germany’s recovery prospects. Nevertheless, the economic foundation remains fragile, and whether the recovery can be sustained will depend on the pace of manufacturing improvement as well as external risks including energy prices and geopolitical developments.

UK Labour Market Continues to Cool

UK payroll employment declined by 4,000 in June from the previous month and was down 71,000 year-on-year, representing a decline of around 0.2%, indicating that hiring demand remained subdued. Meanwhile, annual growth in median monthly pay slowed from 4.6% to 4.3%, suggesting continued moderation in wage growth and a gradual easing of labour market tightness.

Data for the three months to May showed that average earnings excluding bonuses increased by 3.4% year-on-year, maintaining that pace for a third consecutive quarter. This marked a significant slowdown from the 5.9% growth recorded at the beginning of 2025 and the weakest reading since late 2020. FXTRADING Analysis believes the UK labour market is gradually returning to balance after a prolonged period of tightness. Cooling wage pressures should help ease inflation risks. However, employment conditions remain resilient, making a significant near-term economic slowdown unlikely.

New Zealand Inflation Picks Up Again

New Zealand‘s Consumer Price Index rose 1.5% quarter-on-quarter in the second quarter, with the annual inflation rate accelerating from 3.1% to 4.1%, in line with market expectations and moving back above the central bank’s target range. The latest rise in inflation was driven mainly by energy prices, with petrol prices increasing 20.1% from the previous quarter, while prices for other vehicle fuels and lubricants surged 47.7%. Higher residential construction costs also contributed to the overall increase in consumer prices.

From a structural perspective, tradable inflation accelerated to 4.9%, indicating that imported inflation remained the primary driver of price growth. By contrast, non-tradable inflation stood at 3.4%, supported by higher electricity prices and local government rates, while softer dairy and housing-related prices helped offset part of the overall inflationary pressure. FXTRADING Analysis believes that inflationary pressure in New Zealand is still being driven mainly by external energy costs. As long as global energy prices remain elevated, the pace of inflation moderation is likely to stay constrained, meaning the Reserve Bank of New Zealand will need to remain cautious in its policy decisions.

Hawkish Fed Signals Strengthen

Dallas Fed President Lorie Logan stated that the current level of monetary policy restraint remains insufficient to bring inflation sustainably back to the 2% target, adding that moderately higher interest rates could help reduce future risks. Although June inflation data showed some improvement, she noted that overall price pressures remain well above target, and a single month of softer inflation is not enough to justify a change in policy. In her view, acting earlier would be preferable to implementing more aggressive tightening later.

Logan also pointed out that US consumer spending, employment and financial conditions remain resilient, suggesting that monetary policy has yet to exert a sufficiently restrictive effect on the economy. FXTRADING Analysis believes that recent remarks from hawkish Fed officials underscore the central banks continued vigilance toward inflation risks. Going forward, policy decisions are likely to remain centred on inflation dynamics, with a cautious stance expected to remain in place until price pressures are brought firmly under control.

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