FX.co ★ Weekly review of EUR / USD pair as of 05/07/2018

The single European currency did not manage to reverse its course. In many aspects, this was connected with the European statistics, which was frankly weak. Hence, preliminary data on GDP for the first quarter showed a slowdown in economic growth from 2.7% to 2.5%. The unemployment rate remained unchanged. The growth rate of retail sales slowed from 1.8% to 0.8%. But the worst thing in accordance with the preliminary estimates, the inflation slowed from 1.3% to 1.2%, which makes the extension of the quantitative easing program inevitable. Only the growth rates of producer prices are accelerated from 1.6% to 2.1%, but this is not enough to change the mood of market participants.

Compared to Europe, US statistics were much better. In particular, personal income and expenses increased by 0.3% and 0.4%, respectively. After several months in a row, incomes grew faster than expenditures. Many began to fear an inevitable decline in consumer activity and, as a result, there has been a reduction in inflation. Now these fears have receded into the background. The unemployment rate decreased from 4.1% to 3.9%. Indeed, this happened not only due to the fact of 164,000 new jobs were created outside agriculture, but due to the decrease from 62.9% to 62.8% in the share of labor force from the total population. Also, the growth rate of the average hourly wage remained unchanged. Although against a background of lower unemployment, this is not so important.

The meeting of the Federal Commission for Open Market Operations became an absolutely passing event. But it is worth acknowledging that this was exactly what the market participants were waiting for. No surprises happened, and the regulator did not receive new introductory notes.

There is almost no data this week, especially in Europe where Tuesday and Thursday are holidays. In the US, only data on inflation are worthy of attention, which should grow from 2.4% to 2.5%. although this should be an excuse for continuing the strengthening of the dollar, there is a high probability that we will witness a correction. But the reason for this will be the results of the Bank of England meeting on monetary policy since the regulator should raise the refinancing rate. Thus, the pound, through the dollar index, will help a single European currency.

By the end of the week, the euro could rise to the level of 1.2150.