FX.co ★ The referendum in Catalonia strengthened the dollar even more

The dollar continued to strengthen for the entirety of last week, and in many respects due to US data. Although at the end of the week she began to cause too many questions. First came out data on vehicle sales, which rose from 16.1 million to 18.6 million, which significantly reduced concerns about a reduction in consumer activity. Then, data on employment showed a gain of 135, 000, which, although less than the 228, 000 increase in the previous month, was better than forecasts. Also, production orders increased by 1.2%, and given that a month earlier they fell by 3.3%, this greatly pleased investors. Even the head of the IMF is extremely optimistic about the prospects for the US economy. On Friday, the Ministry of Labor published data, which immediately led to the strengthening of the dollar. The unemployment rate declined from 4.4% to 4.2%, and wage growth rates increased from 2.5% to 2.9%. The publication of the data virtually quashed all questions regarding the Fed's further actions, and now there is no doubt that in December the interest rate will be increased once more. However, other data caused questions. After all, with the reduction in the unemployment rate, there is an increase in the proportion of the able-bodied share of the total population to participate the workforce from 62.9% to 63.1%. And if the share of the able-bodied population rises and the unemployment rate simultaneously decreases, a lot of new jobs should have been created in a month. But their number did not increase and instead declined by 33, 000. There is a sense that the Ministry of Labor simply "drew" indicators so that they meet the requirements of the Federal Reserve to increase the refinancing rate. But the market ignored it.

In turn, in Europe and the UK, almost no data came out, and those that were published were more likely to be negative. The unemployment rate in Europe continues to remain at around 9.1%. The growth rate of retail sales slowed from 2.3% to 1.2%. The only thing that can be recorded in the asset is the rate of growth in producer prices, which rose from 2.0% to 2.5%.

Also, the support of the dollar was provided by the results of the referendum on independence in Catalonia.Moreover, the the Spanish authorities recognize the outcome as invalid, so the whole world focused on the forceful dispersal of civilians by the police. Such a development of events (not anywhere, but in Europe) clearly adds uncertainty about the future of the European Union. Moreover, Brussels calls the referendum illegal, and refuses to intervene, calling it "the internal affair of Spain." What kind of stability can the EU speak of now? What are the prospects? Seeing this, investors are obviously not very interested in the released U.S. labor market. Anything is better than Europe's circumstances, even with the tragedy in Las Vegas.

This week, the strengthening of the dollar may continue. The single European currency has virtually no prospects, since the conflict between Madrid and Catalonia has not yet been resolved. A slowdown in industrial production growth from 3.2% to 2.5% is also projected. The situation with the pound is somewhat better, as the growth rates of industrial production in the UK can accelerate from 0.4% to 0.8%. But the main question is Catalonia. If Barcelona declares independence, it could lead to a financial chaos. Since in this case, the question arises about the debt of Spain, which is very large. Investors can start dropping Spanish bonds, and the subsequent growth of their yield will draw demand for government papers of other European countries. The consequences can be devastating. But this is unlikely, as the ECB will soon take emergency measures. But in any case, this does not bode well, especially for the euro.

In the US, it is expected that the growth rates of producer prices will accelerate from 2.4% to 2.6%. And after that, inflation may rise from 1.9% to 2.0%. The only thing that can mess up the life of the dollar is data on retail sales, whose growth rates should decrease from 3.2% to 3.1%. But inflation is more important. Moreover, on Wednesday, the text of the minutes of the Federal Open Market Committee's last meeting will be published. And although the latest data on unemployment and inflation forecasts leave little doubt that the Fed will raise the interest rate in December, investors would like to see it in the text of the minutes.

By the end of the week, the euro/dollar pair will decline to 1.1575.

The pound/dollar pair has all opportunities to decline to 1.2850.