FX.co ★ Weekly review of EUR / USD as of May 14, 2018

It seems that the fall of the euro stopped and at the very end of the week, it was already strengthening. This is surprising, since there were several holidays in Europe, so that the market could rely only on US statistics, which can hardly be called weak. It is most likely that we will need to state the fact that, although there have been no reasons for correction, market participants are no longer interested in selling the euro. The dollar is so heavily overbought that for further growth, we need a completely out-of-the-way excuse. At the same time, inflation in the US rose from 2.4% to 2.5%. Even this did not impress investors. Apparently, only if the Fed sharply raise the refinancing rate, the dollar will have the opportunity to strengthen even more. However, it is worth paying attention to the fact that the growth rates of producer prices have slowed from 3.0% to 2.6%, which worsens the inflation forecast and explains the restrained reaction to the growth of inflation. Another problem is the continued growth in inventories in warehouses of wholesale trade, which increased by 0.3%.

We must admit that there will not be too many reasons for the growth of the euro. The second GDP estimate for the first quarter should confirm the fact of a slowdown in economic growth from 2.8% to 2.5%. Inflation, most likely, will remain at the same level at 1.2%, which clearly indicates the extension of the quantitative easing program. Only the growth rates of industrial production should accelerate from 2.9% to 3.7%. So only an excessively overbought dollar, as well as waiting for the long-awaited correction, can help strengthen the euro.

Strangely enough, it is the US statistics that can cause a weakening of the dollar. Although inflation has increased, the growth rate of retail sales should slow from 4.5% to 4.1%, which significantly exceeds inflation. Such weak data on retail sales will have a serious impact on the dollar and even the acceleration of industrial production growth from 4.3% to 4.5% will not be able to mitigate the negative.

It is most likely that the sluggish weakening of the dollar will continue throughout the week and by the end, the euro will rise to 1.2100.