The dollar looks confident with pending publication of a key February employment report on Friday. Despite the fact that the February indexes from Markit turned out to be somewhat worse than expected, its growth compared to January still should be recognized as strong. In the services sector, it moved from 54.2p to 56p while the composite from 54.4p to 55.5p. ISM in the services sector has grown spasmodically from 56.7p. to 59.7p, which suggests that the slowdown in GDP growth in Q1 will be less deep.
The IBD/TIPP index of economic optimism, which reflects consumer sentiment regarding the outlook for the economy, also rose significantly, to 55.7p after several months of decline. Today, the ADP report on employment in the private sector in February will be published. If the data turns out to be better than expected, the markets will most likely establish that the report on the labor market on Friday may turn out to be significantly more positive than forecasts, which will support the dollar in the short term.
A spoon of tar can add to the publication of the trade balance for December with the chance of improvement vanishingly small. In general, the dollar looks confident and it is ready to continue to grow against most competitors.
EUR / USD pair
Macroeconomic data published on Tuesday turned out to be quite positive but they could not help the euro to return to the growth trajectory.
The growth of retail sales in January amounted to 1.3% compared to the annualized rate of the figure rose to 2.2% in December, which is noticeably better when compared to the United States or the United Kingdom. The PMI index for the services sector in Germany rose to 55.3p in February against 53 a month earlier, exceeding the forecasts. On another report, the composite index rose to 52.8 p, which also turned out to be higher than the January 52.1 p and higher forecasts.
Despite the fact that the latest data allows us to hope for a way out of the protracted recession of the eurozone economy, it is necessary to proceed for the time being from the fact that the ECB lowered the forecast of GDP for 2019 from 1.9% to 1.3%. At the January meeting, the ECB officials expressed their intention not to rush into a reaction to the changed economic conditions but to wait for more clarity. Markets suggested that a more than half-year slowdown would force the ECB to announce or at least hint at the possibilities of a new incentive program. However, the recent data show that the position of the regulator was chosen correctly, and perhaps, no reaction should be developed at all.
At the moment, the market expectations for the rate are clearly dovish. Predictions about the first rally "approximately in the summer of 2019" have long gone down in history, and now, the markets are waiting for a rate hike by 20p closer to the end of 2020. , the ECB may well lower the forecast for inflation at tomorrow's meeting and also announce another round of LTRO on GDP once again. You also need to keep in mind that in the month of May, there will be elections to the European Parliament and the result of which may be the loss of Draghi's mandate, which means that the ECB has no reason to take any actions that will have to be revised in the summer.
The euro in the current environment will be under pressure and more likely, it is due to the movement to the support level of the February low at 1.1233. The efforts of the bulls to stabilize the euro may end in resistance 1.1307, where sales will resume.
The PMI in the services sector of the UK rose to 51.3p in February against 50.1p a month earlier instead of the expected decline, which supported the pound and allowed it to begin consolidation in the range of 1.3100 and 1.3180.
The minutes of the Bank of England meeting published on Tuesday also played a positive role and somewhat calm the markets before the historic Brexit parliamentary vote. According to BoE, the UK banking system is quite ready for the economic turmoil associated with the country's withdrawal from the EU, and even without an agreement can stop everything emerging financial threats.
However, the pound remains under pressure amid the threat of a successful support test at 1.3095, followed by a move to the support area of 1.2950/70 which remains high. The probability of a corrective growth to the upper end of the range is low and the arguments of the bears on Wednesday look clearly stronger.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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