Honestly, the behavior of the single European currency and the pound was quite strange yesterday, simply for the simple reason that they moved in completely different directions. But the macroeconomic calendar was completely empty and there wasn't much news either. Nevertheless, the single European currency rose in price, and the pound became cheaper. At the same time, the behavior of the single European currency is at least somewhat understandable, since everything is very similar to common speculation in anticipation of the publication of inflation data in the United States. However, this happened almost a day before the publication itself. Apparently, having nothing else, speculators decided to prepare in advance for the main event of today. And the bottom line is that market participants behave as if they have no doubt that the forecasts for rising inflation in the United States will be confirmed. And for this very reason, we see a speculative movement in the opposite direction. When the data is published, it will be possible to sell the single European currency against the dollar with maximum profit, on the reverse movement. But what happened to the pound does not fit into this scheme, because, logically, it should have behaved the same way.
What's more interesting is the fact that the pound generally ignores British statistics. The pace of decline in industrial production in the UK slowed down from -23.8% to -20.0%, but no reaction followed although there is at least some improvement in the situation with the industry. The dynamics are clearly positive. However, the scale of the recession is the largest in more than fifty years. To be more precise, there has not been such a serious decline in industrial production in the whole post-war period in Great Britain.
Industrial Production (UK):
The market will most likely ignore data on industrial production in Europe, although the pace of its decline should slow down from -28.0% to -20.2%. That is, there is a positive trend again.
Industrial Production (Europe):
The market is waiting solely for inflation data in the United States. After all, the further behavior of the Federal Reserve System depends on this. The forecasts are extremely optimistic, and inflation is expected to rise from 0.1% to 0.5%. It is believed that inflation can accelerate to 0.6%. And it is clear that if these forecasts come true, the dollar will receive an excellent incentive for growth. However, there is reason to believe that everything will go wrong and the data will turn out to be slightly different. This is indicated by recent data on producer prices, whose decline rates have remained unchanged. However, even if inflation does not grow as much as expected, the dollar still has good chances of growth. At least against the single European currency. Like it or not, but it is somewhat overbought, and its growth yesterday was not based on anything. But if inflation does not change at all or even decreases, then investors may start to sell dollars in a panic. Indeed, such a development of events threatens with new stimulating measures on the part of the Federal Reserve System.
Inflation (United States):
The euro/dollar pair managed to locally jump to the area on July 9 high - 1.1370, where it slowed down on a systematic basis and as a result, formed a rebound in the opposite direction. A temporary price fluctuation can be assumed within the range of 1.1335/1.1355, where depending on the fixation points, as well as data on US inflation, the further course of the price will be clear. In the case of downward development, the prospect is 1.1300-1.1260, while in the case of upward development, the prospect is 1.1400.
The pound/dollar pair managed to slow down the upward movement in the area of 1.2665, where a slowdown of 1.2580/1.2565 occurred which resulted in an acceleration in the opposite direction. It can be assumed that in the case of holding the given mood, the quote will go towards the level of 1.2500, where, depending on the behavior of market participants and price fixing points relative to the level of (1.2500), the subsequent movement will be understood.