Unconvincing statistics from Europe and good figures on retail sales in the US predetermined yesterday the weakening of the European currency. Despite all bulls attempts to keep the instrument in the current price range, the dynamics of trading on EUR / USD was clearly negative. Today the current mood is preserved.
The actual figure for retail sales in the US in April was slightly below the forecast level, however the growth rates were revised upward last month, as a result, the final indicator was generally in line with market expectations and mostly neutral. These data could hardly give such an impulse to the US currency, but the growth of inflation expectations and the speech of the FRB head of San Francisco, we think might be the right driver. Yesterday, the president of the Federal Reserve Bank of San Francisco said that, in his opinion, the "neutral" rate level was 2.5% (now the rate is at 1.5% -1.75%), and the Fed will come to it by the end of this of the year. This implies four rate hikes this year.
After such verbal support for the American currency, the euro had no chance. European currency failed to hold on and moved under pressure. However today the euro bulls had another chance. Important data on inflation in the Eurozone was published. According to published statistics, the consumer price index for the month did not change and remained at 1.2%, the core indicator did not change either, it remains at the level of 0.7%, and the dynamics for the month coincided with the forecast of 0.3%. Published data can be described as neutral. In addition, the speech of the head of the ECB Mario Draghi is still in focus.
The United States responded with statistics on industrial production. In the US, the industry increased demand for food in April to meet the growing demand from consumers and businesses, indicating that US economy is maintaining the growth.
Industrial production grew from 0.7% in April, the Federal Reserve said. Data records higher production for the third consecutive month. Production has increased across all sectors and has grown by 3.5% over the year.
After such overwhelming data, it's surprising how slightly EUR / USD dropped. Shortly after the start of US session, EUR / USD is trading at 1.1802. Bulls try to stop the decline at the round mark of 1.1800. We will follow how events will develop further.
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