FX.co ★ The dollar may continue to rise

The single European currency and the pound made quite serious attempts to grow. The euro rose above 1.19, and the pound almost reached 1.33. Both currencies partly failed to gain a foothold on the target levels. However, they began to lose their positions during the weekend, and their growth appeared to exhaust itself already.

The single European currency had many reasons to grow. The unemployment rate fell from 9.2% to 9.1%, and preliminary inflation data showed stability at 1.3%. A preliminary estimate of GDP growth rates showed that they accelerated from 1.9% to 2.1%. Nevertheless, the business activity index in the manufacturing sector fell from 57.4 to 56.6, which is quite significant. The business activity index in the service sector remained at the same level at 55.4. Thus, the composite index decreased from 56.3 to 55.7. Also, the growth rates of producer prices slowed from 3.4% to 2.5%, which does not stimulate optimism in the growth potential of inflation. Although at the end of the week, a positive data was added on retail sales, whose growth rates accelerated from 2.4% to 3.1%. In any case, closer to the end of the week, the statistics were no longer so unambiguous.

The UK statistics was disturbed since the very beginning of the week. The volume of consumer lending amounted to 1,458 million pounds against 1,769 million pounds a month earlier. The number of approved applications for mortgages decreased from 65,109 to 64,684. Moreover, according to Nationwide, the growth rate of house prices slowed from 3.1% to 2.9%. Also, the business activity index in the construction sector declined from 54.8 to 51.9. But the housing market is a very significant indicator for the British economy. Although the business activity index in the service sector increased from 53.4 to 53.8, this slightly helped the pound. Especially, the pound was affected by the results of the BoE meeting regarding the monetary policy. Moreover, the refinancing rate remained unchanged, so the number of votes cast for the growth was also reduced. This dispelled any hope for a rapid rate increase from 0.25% to 0.50%.

But in the US there were many reasons for optimism. The business activity index in the manufacturing sector increased from 52.0 to 53.3. The business activity index in the service sector grew from 54.2 to 54.7. As a result, the composite index increased from 53.9 to 54.6. Personal income remained unchanged while expenses increased by 0.1%, which, despite the seemingly negative nature, gives hope for the growth of consumer activity. Then, the ADP data showed an increase in employment by 178,000 and a month earlier step up by 191,000. Nevertheless, this pessimism was completely left behind in the background of other data. Despite the increase in the number of repeated applications for unemployment benefits from 1,965 thousand to 1,968 thousand, the number of repeated applications decreased from 245,000 to 240,000. Thus, the number of appeals fell by 2,000. While the data from the Ministry of Labor of the USA ended the week.The unemployment rate decreased from 4.4% to 4.3%, and despite the fact that the share of labor in the total population increased from 62.8% to 62.9%. All because of the fact that 209,000 new jobs were created outside agriculture but it does not matter even if it is less than 231,000 a month earlier. Since the satisfactory level of FRS is 100,000 new jobs per month. Also, the growth rate of the average hourly wage remained steady, although they were waiting for the decrease.

There is no any important data from Europe this week. The only thing to pay attention is the UK industrial production by which the rate of decline should remain unchanged. Hence, they are unlikely to have a significant impact on the pound rate.

But in the US, despite the small amount of interesting data, they have a significant influence. Thus, the growth rates of producer prices can accelerate from 2.0% to 2.2%. But more importantly, inflation should accelerate from 1.6% to 1.8%, which will clearly increase interest in the dollar.

Thus, there is no reason for further growth of the euro or pound, and the dollar may further strengthen its positions. By the end of the week, the euro may fall to 1.1650, as the pound has all chances to reach the level of 1.2850.