06.08.201814:27 Forex Analysis & Reviews: Demand for the US dollar will continue

Long-term review

The euro rose against the US dollar after the release of a weak report on the labor market and foreign trade, but then investors quickly recorded profits, which led to the continuation of a downward trend in risky assets amid expectations of an increase in interest rates in the US.

A good report on retail sales in the euro area did not support the euro on Friday in the morning. According to the data, retail sales in the euro area in June this year, compared with May, increased by 0.3%, compared with June, compared with June, the increase was 1.2%.

The increase in retail sales occurred despite the growth in energy prices, which indicates the recovery of the euro area economy in the second quarter of this year. Economists predicted that in comparison with May retail sales will grow by 0.4%.

A good report on retail sales was offset by weak data from the research company IHS Markit, which confirmed that the composite index of supply managers of the eurozone in July 2018 dropped to 54.3 points from 54.9 points in June.

All the market's attention in the second half of the day was focused on the report on the rate of hiring in the US, which disappointed investors, despite the drop in the unemployment rate, which indicates the growth of the labor market.

According to the US Department of Labor, the number of jobs outside agriculture increased by 157,000 in July this year, while the unemployment rate fell to 3.9% against 4.0% a month earlier.

Data for June were revised. According to the report, in June the number of jobs increased by 248,000. Economists projected job growth of 190,000 and unemployment at 3.9% in July. The growth of average hourly earnings by 2.7% compared with July 2017 will also have a positive impact on the pace of economic growth in the future.

A weak report on the growth of the US foreign trade deficit, despite all the measures taken by the administration of the White House, also did not appeal to investors. A sharp increase in imports and a decrease in exports adversely affected the main indicator.

According to the US Department of Commerce, the deficit in trade in goods and services in June this year increased by 7.3% compared to the previous month and amounted to 46.35 billion US dollars. Exports fell by 0.7%, while imports increased by 0.7%. Economists predicted that the deficit would increase to 46.6 billion dollars.

The index of supply managers PMI for the service sector in July 2018 decreased to 56.0 points, against 56.5 in June. Such data was provided by IHS Markit. Let me remind you that the value above 50 points indicates an increase in activity.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Jakub Novak,
Analytical expert
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