On July 24th, the German GfK Consumer Confidence Index caught the attention of investors.

The German GfK Consumer Confidence Index rose from -21.6 in July to -18.4 in August. The improvement of consumer confidence may promote consumer spending. Higher consumer spending may drive demand driven inflation, challenging market expectations for the European Central Bank's (ECB) interest rate cut in September.

Other survey data includes an 11.5 point increase in income expectations, reaching 19.7 points, the highest level since October 2021; The willingness to save index remains unchanged at 8.2 points; The purchase intention index increased by 4.6 points, reaching -8.4 points; Economic confidence increased by 7.3 points, reaching 9.8 points, returning to the level of May 2024.

Rolf Buerkl, a consumer expert at the Nuremberg Market Decision Institute (NIM), commented on this: "In Germany, the excitement caused by the European Football Championship has also greatly affected the mood of the public. However, whether this effect is sustainable or a short-term phenomenon remains to be seen. Just as this good mood appears quickly, it may also disappear quickly. If it is the latter, then the road out of low consumption will be long and difficult.

The sub indicators of the Consumer Confidence Index convey positive signals. The upward trend of income expectations and purchase intention indicates a rebound in consumer spending.

The growth of consumer spending may stimulate demand driven inflation and delay the timing of ECB interest rate cuts.

However, the ECB may evaluate the sentiment of the August survey before the September interest rate decision. If the purchasing intention drops significantly, it will support the interest rate cut in September.

Prior to the release of the GfK Consumer Confidence Report on July 24th, the EUR/USD had climbed to a high of 1.08541 before falling to a low of 1.08416. However, after the report was released, the EUR/USD fell from 1.08526 to a low of 1.08488.

Later on Wednesday, the German service PMI data will be the focus.

Economists predict that the German HCOB service PMI will remain at a level of 53.1 in July. Lower than expected numbers may support investors' bets on a September ECB rate cut.

The service industry accounts for about 70% of the German economy and has a significant impact on overall inflation.

However, investors should consider employment and price sub items. The employment growth rate can affect wage growth, disposable income, and consumer spending. The trend of consumer spending may affect demand driven inflation.

Last month, the German HCOB service PMI fell from 54.2 in May to 53.1, a three-month low. Employment growth has slowed down, and the rate of price increase is the slowest since March 2021. A similar trend will support investors' expectations of an ECB rate cut in September.