FX.co ★ Weekly review of the currency pair EUR / USD for May 21, 2018

The single European currency did not manage to reverse the trend, and it continued to lose its positions with new force. If we consider macroeconomic statistics, then to some extent, the reason for growth was, as the growth rate of industrial production accelerated from 2.6% to 3.0%, although they expected more. Also, the growth rate of the construction industry accelerated from 0.2% to 0.8%. However, the second GDP estimate for the first quarter confirmed the slowdown in economic growth from 2.8% to 2.5%. Much more importantly, the final data on inflation coincided with a preliminary estimate, and inflation slowed from 1.4% to 1.2%. This alone indicates that the ECB will extend the quantitative easing program. In principle, all representatives of the ECB spoke about this in the past week. Of course, there were no specific phrases, but there were many reservations that if the situation did not improve, the program would be extended. Statistics indicate that the situation is deteriorating.

At the same time, the US statistics was not unambiguous. On the one hand, there were many reasons for concern, as the growth rate of retail sales slowed from 4.9% to 4.7%. The number of construction projects started decreased by 3.7%, and construction permits issued by 1.8%. And the growth rate of industrial production slowed from 3.7% to 3.5%. However, commercial stocks stopped growing, and the number of applications for unemployment benefits decreased by 76 thousand. And of course, the general mood about the policy of the ECB gave the dollar the strength.

Nevertheless, the market continues to wait for a reason for correction, and unfortunately, this week may disappoint us. Preliminary data on business activity indices in Europe are expected to be extremely negative. The business index in the service sector should decrease from 54.7 to 54.6, and the production index from 56.2 to 56.0. Thus, the composite index can be reduced from 55.1 to 54.9. Similar data in the US can show a slightly different picture of the picture. So, the index in the service sector should grow from 54.6 to 54.9, and the production index may decrease from 56.5 to 56.3. However, the weight of the index in the service sector is much larger, so the composite index should increase from 54.9 to 55.0. Also, housing prices can increase by 0.5%, and home sales in the secondary market by 0.3%. The data on applications for unemployment benefits, as their number should increase by 56 thousand, can also be negative. Also, orders for durable goods can be attributed to bad news, as their volume should be reduced by 1.4%. But all the negative will be smoothened with the content of the text of the minutes of the meeting of the Federal Commission for open market operations, as it hopes to find instructions on the timing of the next increase in the refinancing rate. At the moment, everyone believes that this will happen during the next meeting.

Despite a number of negative data that may be released this week in the US, in Europe the picture is much worse. Similarly, unlike the ECB, the Fed intends to further raise the refinancing rate, so there are no grounds for correction. Most likely, the dollar will strengthen, though at a much slower pace, and the week will end at 1.1650.