The US currency came up victorious by the end of this week. It was supported by a convincing macroeconomic data, an increase in the S&P 500 index and a return of risk appetite from investors. Analysts had portended the greenback to a series of upgrades that will strengthen its position.
Previous predictions of a possible slowdown in the US economy were unfounded. The market considered this a false alarm, focusing on current macroeconomic data from the United States. This information raised the dollar on the crest of a positive wave, giving investors confidence. Strong American statistics on business activity in the manufacturing sector and in the field of new industrial orders have become a springboard for the growth of the greenback.
Optimism was brought to the market by indicators such as the index of purchasing managers in the service sector, the level of employment in the US private sector as well as the trade balance. United States stock indices also pleased the market, updating historical highs. The cherry on the cake was a statement by Mary Dailey, President of the Federal Reserve Bank of San Francisco, who emphasized the Fed's merits in reducing the rate on federal funds, thanks to which the regulator protected the US economy from negative factors. According to Dailey, these measures gave confidence to the American stock market and contributed to the growth of the S&P 500 index.
Positive statistics from the United States has become a powerful driver for the recovery of the American currency. Greenback, which had previously gone to his goal in small steps, now went on the offensive, demonstrating remarkable strength. According to current data, the index of business activity in the manufacturing sector of America reached 51.9 points, exceeding the forecast of experts by 51.7 points. Meanwhile, the PMI index in the services sector rose to 53.4 points, also exceeding analysts' expectations.
Many are impressed with the progress in the US labor market. According to the national statistics agency ADP, in January 2020, the number of people employed in the non-agricultural sector of the country increased by 291 thousand. The previous forecast showed an increase of 156 thousand people. The agency noted that this is the highest growth in employment in the US private sector over the past four years. Such growth almost doubled the expectations of experts. An increase of 291 thousand was recognized as the best dynamics since May 2015. The lion's share of jobs of 237 thousand, fell on the services sector, which, along with the acceleration of business activity in the non-productive sphere from 54.9 to 55.5 points, demonstrates an improvement in domestic demand.
Positive dynamics were noted in relation to the US trade balance. Over the past six years, its deficit has decreased markedly by 1.7%, to $616.7 billion. Experts recorded a decrease in the negative balance of foreign trade with China by 17.6%, to $345.6 billion. Based on this, some experts concluded that the protectionist policies of US President Donald Trump are yielding results.
However, the current situation carries serious risks for the euro, analysts warn. At the moment, the deficit of US foreign trade with the EU has reached an impressive $177.9 billion, which increases the likelihood of a new trade conflict that could undermine the eurozone economy.
While the dollar was celebrating victory, the euro was once again an outsider. On Thursday, February 6, for the first time in four months, the euro dropped below 1.1000. Much of this was contributed by ambiguous information on the eurozone economy. On the one hand, the EU services sector activity index and composite PMI were revised upward, while retail sales, went negative. Against this background, the comments of Christine Lagarde, head of the ECB, were not too positive. She noted the impact of climate on monetary policy and the increasing uncertainty associated with the coronavirus epidemic. The current situation added negativity to the European currency, strengthening the already strong position of the dollar.
Beijing's statement on reducing US import tariffs on certain products, as well as information on the creation of a coronavirus vaccine in China, joined in with strong US macro statistics. This brought the quotes of the EUR / USD pair to an important support level of 1.0980. Experts are sure that this breakthrough will increase the risks of continuing the peak near 1.0905–1.0915 marks. This indicator was recorded on the morning of February 7.
Earlier, analysts emphasized that the key level of 1.1000 was broken through on Thursday, February 6. There was a desperate struggle between the "bulls" and the "bears" yesterday for this bar, and one or the other camp won with varying success. Quotes of the EUR / USD pair for a long time were near the levels of 1,1003–1,1004 but then slipped down.
Experts have recorded repeated attempts to get away from the lows of the psychological level of 1.1000, but they were unsuccessful. On Friday, the pair continued to fall, approaching 1.0972.
Subsequently, the tandem entered the downward spiral, resuming attempts to find the bottom. Now the EUR / USD pair is trading near the levels of 1.0966–1.0967, trying to leave this range.
According to repeated observations by experts, the American currency has a huge margin of safety, allowing it to recover after any loss. Difficulties that arise on the path of the greenback only provoke it, giving an additional impetus to overcome. Analysts are confident that the USD will maintain and increase its potential, and a strong national economy will support it.