Over the past week, the dollar managed to stop its weakening against the euro but it continued to lose ground against the pound. If you look at the statistics, then this behavior looks rather strange but politics interferes. More precisely, politics that is happening in Germany. The political crisis has not been resolved and it seems that Angela Merkel does not intend to go into early elections. However, even if the CDU / CSU and SPD form a coalition government, it is unlikely to be effective because of the accumulated disagreements on a number of key issues. And if such a government makes any mistakes, then it will be the fault of Angela Merkel. Early elections would be the most favorable option as this will reduce the likelihood of serious problems. It is curious that it is the German Federal President, who is a representative of the SPD, who is trying to persuade Angela Merkel to compromise.
Curiously, the US statistics was quite good which can not be said about the data from the UK. Data in the UK still did not allow the dollar to improve its position against the pound. So, sales of new homes grew by 6.2% while the growth rate of house prices accelerated from 5.8% to 6.2%. All of this indicates that the slowdown in inflation is rather temporary. Preliminary data on GDP showed that the rate of economic growth accelerated from 2.2% to 2.3%. In the UK, the number of approved applications for mortgages declined from 66.1 thousand to 64.6 thousand and consumer lending grew by 4.8 billion pounds compared to a month earlier which grew by 5.2 billion pounds. European statistics was quite curious. The growth rate of consumer lending accelerated from 2.5% to 2.7% and, according to preliminary estimates, inflation accelerated from 1.4% to 1.5%.
If everything is relatively obvious with the euro and the political crisis in Germany clearly has its negative impact, then the pound's behavior is connected with other reasons. Namely, it is connected with the fear of investors that the Fed will not raise the refinancing rate in December. Although it is unlikely that the Fed will leave the rate unchanged, such fears are still growing. And the closer to the meeting of the Federal Commission for Open Market Operations we are, the more panic there will be on the market.
Political factors continue to exert a strong influence on the market. The week began with a gap on the EUR/USD pair in the direction of strengthening the dollar. The thing is that the Senate passed a bill on tax reform and although the senators can make their edits before it is signed by Donald Trump, in essence, it will be exactly the same reform that the US President promised. It is also unclear how and when everything will be resolved in Germany. Nevertheless, by the end of the week, political aspects will go to the background. Unless, of course, something extraordinary happens. On Friday, the report of the US Department of Labor was published and the unemployment rate is projected to increase from 4.1% to 4.2%. Moreover, 185 thousand new jobs can be created outside agriculture compared with 261 thousand in the previous month. Nevertheless, only the announcement of the formation of the ruling coalition will help the unite European currencies. In Europe, for example, producer prices are expected to slow down from 2.9% to 2.6% and retail sales are predicted to decline from 3.7% to 1.7%. In the UK, the growth rate of industrial production is expected to accelerate from 2.5% to 3.6%.
Apparently, the EUR/USD pair will continue to decline in the first half of the week and then it will start to grow. Unless, of course, politicians interfere with their statements. Thus, the week will end with those values from which it began.
The GBP/USD pair has every chance to further develop its success so that by the end of the week, we might see it at the level of 1.3600.