FX.co ★ Improving market mood will support the demand for company shares and put pressure on the US dollar

The strengthening of the US dollar paused, despite the publication of data on industrial US inflation, which expectedly showed strong growth following the figures of consumer inflation.

Based on the presented data, the producer price index rose by 6.2% against 4.2% in annual terms As for monthly terms, it also increased by 0.6% in April against a 1.0% growth in March and expected growth of 0.3%. The core values of this indicator also increased significantly by 4.1% from 3.1% year-on-year, and maintained the growth rate of 0.7% against the forecasted growth of 0.3% month-on-month.

The weak reaction of the market to these figures is explained by the fact that the negativity was actually already taken into account in prices after the release of consumer inflation data earlier this week. But on the contrary, the publication of the value of the number of applications for unemployment benefits, which showed a noticeable decline to 473,000 against 507,000, was able to support positive sentiment in the markets, which allowed the American and generally European and Asian stock indices to grow.

In general, it seems that the market sentiment is slightly improving, since the latest US economic statistics show that the economy should not be expected to overheat in the near future, and the Fed's assurances that the surge in inflation will be local in nature also somewhat reassure investors.

It is likely that if today's retail sales data is no worse than expected and shows an increase, then positive sentiment will continue to support cautious demand for company shares and commodity assets. In this case, the US dollar will stop growing against the major currencies and may significantly make a downward correction. According to the ICE dollar index, it may adjust to the recent local low of 90.00 points.

Analyzing the current market situation, we believe that the new trading week can start with a recovery in general demand for risky assets and a downward pullback of the US dollar against a basket of major currencies.

Forecast of the day:

The EUR/USD pair is trading above the level of 1.2100. We believe that yesterday's forecast remains valid. The improving market mood will allow the pair to rise to the level of 1.2175.

The USD/JPY pair continues to consolidate near the level of 109.40. The breakdown of which will lead to a local decline to the level of 108.90.