FX.co ★ Trading plan for EUR/USD and GBP/USD on July 1, 2021

The market expectedly ignored Britain's final GDP data for the first quarter. After all, they completely coincided with the preliminary estimates, which indicated a slowdown in the economic downturn from -7.3% to -6.1%. This means that market participants have not learned anything new, and the very fact that the pace of economic decline is slowing has long been embedded in the current exchange rate of the pound.

GDP Change (UK):

In addition, they also ignored the EU's preliminary inflation data. These data showed that the growth rate of consumer prices slowed down from 2.0% to 1.9%, although it was expected to remain unchanged. Under normal conditions, a decline in inflation could be perceived as a negative factor, but the situation right now is slightly different. There are widespread fears about a sharp rise in inflation, which can intensify the economic crisis caused by the coronavirus pandemic. Thus, the slowdown in European inflation is more likely a positive factor for the Euro currency, but there was no reaction from the market in any way.

In fact, this is a perfect illustration that the market is focused on the US dollar's growth. It immediately began after the Fed's plans to raise the refinancing rate is announced, after which the market needs some good reason to weaken the US dollar. So, the inflation data in Europe, albeit preliminary, could only support the euro temporarily.

Inflation (Europe):

The US dollar has grown steadily in response to the country's employment growth. It was assumed that employment will grow by 450 thousand, but it rose by 692 thousand. Such an acceleration immediately led to the strengthening of the US dollar. This is largely due to heightened expectations for tomorrow's release of the United States Department of Labor report. Since employment is actively growing, the report will certainly be better than forecasts. But, despite all the unambiguity of the employment data, the growth of the dollar turned out to be quite slow and seriously stretched over time.

Employment Change (United States):

Today's unemployment data, although expected to decline from 8.0% to 7.9%, is unlikely to change anything given the reaction to yesterday's European inflation data. This is an extremely positive moment, but unemployment in the country is still extremely high especially in comparison with the US. And even if the market shows some activity, the maximum that can be counted on is a small-scale growth, which will still be quite short-term, since market participants are more focused on the US labor market and its state.

Unemployment rate (Europe):

In addition, it is worth paying attention to the US data on applications for unemployment benefits. They are becoming somewhat more important since the report of the United States Department of Labor is being published tomorrow. Here, the number of initial requests is expected to fall by 41 thousand, while repeated requests may fall by 70 thousand.

It seems that the overall decline in the number of applications is small, but this will play in favor of the US dollar. In other words, the national currency can further strengthen its position. Another thing is that the scale of the dollar's strengthening will be somewhat more modest than yesterday since employment data is still relevant.

The number of re-claims for unemployment benefits (United States):

The EUR/USD pair managed to break through the base of 1.1847 from June 21 as a result of the quotes' full recovery relative to the recent correction. If the price is kept below the level of 1.1815, a subsequent downward cycle is not excluded.

Following the euro, the GBP/USD pair attempts to break through the bottom of June 21, but keeping the price below the area of 1.3785/1.3800 is still not confirmed. In order for sellers to have a chance to further decline, the quote must be kept below the level of 1.3785; or else, a rebound may occur.