Honestly, what is happening on the market surprises more and more. The pound completely ignores its own statistics, but reacts extremely violently to the American currency. And in theory, the single European currency also had to decline under the influence of American statistics. However, it stood still, as if nothing had happened. Thus, it cannot be said that the market definitely pays attention only to American statistics.
At the same time, inflation data in the UK turned out to be incredibly good, as it increased from 1.3% to 1.8% instead of the forecast of 1.4%. Indeed, such a sharp increase in inflation clearly indicates that the Bank of England will not lower the refinancing rate for at least the first half of the year. And inflation itself is a factor favorable for the currency market. Nevertheless, investors did not seem to see this data.
The market behaved exactly the same way at the time of publication of data on construction in Europe, the volume of which decreased by 3.7%. That is, after the news that instead of growth by 1.2%, construction is generally declining, investors behaved in the most usual way – nothing, as if this data was not there.
Scope of construction (Europe):
The market revived, and even then, in a strange way, only during the publication of producer prices in the United States. Indeed, their growth rate accelerated from 1.3% immediately to 2.1% instead of the expected 1.7%. Considering the fact that this is an extremely inflationary factor, and indicates not only a further increase in inflation, but also that the Federal Reserve is likely to think about raising the refinancing rate, the dollar growth is quite understandable. However, the dollar increased only against the pound, while the single European currency continued to stand still.
Manufacturer Prices (United States):
The stability of the single European currency is even more surprising if we take into account the fact that the data on construction in the United States were significantly better than forecasts. The number of new buildings decreased by 3.6%; but, this happened after an increase of 17.7%, and they expected a reduction of 11.7%. So the decline in construction should not be scary, as it is simply the result of extremely strong growth in the previous month. However, what is much more important is that the number of construction permits issued increased not by 2.2%, but by 9.2%. Therefore, it is worth waiting for further growth in construction volumes in the near future. So we can assume that if everything is clear to the pound to investors and no one expects anything good from Brexit, then what is going to happen with the single European currency is not yet clear especially, that it was already quite seriously weakened.
Number of Building Permits (United States):
To some extent, the market’s indifference to any statistics other than the US can provide support to the pound today as well as a single European currency. Moreover, they are clearly oversold, and the market needs a local rebound. The fact is that they expect a slowdown in retail sales growth from 0.9% to 0.5% in the UK, which completely levels inflation growth. Thus, it would be better if investors did not see this data.
Retail Sales (UK):
Moreover, excessive attention to American statistics should be the reason for the rebound in the currency exchange market. The fact is that the total number of applications for unemployment benefits should increase by 17 thousand. Yes, the total change is insignificant, but growth is expected for both primary and repeated applications. So, the number of initial applications should increase by 10 thousand, and repeated applications by another 7 thousand. The general negative tonality of both indicators will definitely be perceived not in the most joyful way.
Repeated Unemployment Insurance Claims (United States):
The EUR / USD currency pair continues to follow the downward trend, where the quote has already descended to the level of 1.0780. It is likely to assume that short positions are already overheated and it’s time for a pullback, but if the inertial move is still maintained, then a descent towards 1.0750 will be another goal.
The GBP / USD currency pair managed to accelerate after hanging within the level of 1.3000, and going down to the support area of 1.2885. It is likely to assume a local slowdown in the region of 1.2880 / 1.2900, where it is worthwhile to carefully monitor the behavior of the quote and fixation point relative to the values of 1.2880 / 1.2915.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.