Dollar continued to rally on Wednesday, thanks to the latest data on US labor market, which strengthened expectations that the Federal Reserve will increase interest rates much earlier than scheduled.

Meanwhile, euro saw a slight decline in price even though the number of unemployed in Germany fell by 38,000 in June. Apparently, despite the decrease in jobless citizens, the unemployment rate remained unchanged at 5.9%.

Inflation in the whole Eurozone also slowed amid weaker growth in energy prices, which convinced the European Central Bank to take a wait-and-see position regarding stimulus programs for the economy.

Data released on Wednesday said inflation rose only 1.9% in June, a bit lower than the 2.0% growth in May. As for core inflation, which excludes energy and food prices, a 0.9% drop was recorded.

The report also indicated that energy prices increased 12.5%, while food, alcohol and tobacco prices jumped 0.6%. But all in all, there is a real slowdown in growth rates, which means that in the coming months, energy prices will most likely remain at current levels.

In France, Insee said consumer price inflation climbed to 1.5% due to rising prices for manufactured goods.

Going back to US, ADP published a report on the labor market, which showed that jobs in the private sector surged 692,000 in June. This reduces uncertainty in economic recovery, moreso since activity is picking up because of the easing of restrictions related to the coronavirus pandemic.

ADP said jobs in the service sector rose 332,000, while jobs in the health sector increased by 93,000. As for jobs in the manufacturing sector, they climbed 68,000.

On Friday, the US Department of Labor will release data on the unemployment rate, which many project to be at 5.6%.

Considering all this, Dallas Fed President Robert Kaplan said now is the right time to consider cutting back bond purchases. Until now, the central bank buys $ 80 billion Treasury bonds and $ 40 billion MBS monthly.

Unsurprisingly, EUR / USD decreased because of this news, and today a lot depends on 1.1840 because dropping below it will provoke another decline to 1.1760 and 1.1710. However, if the quote rises above 1.1880, euro will have a chance to increase towards 1.1925 and 1.1980.

GBP

Pound dropped on Wednesday after reports showed that the UK economy contracted more than estimated. The latest data said UK GDP fell 1.6% in the first quarter, instead of only 1.5%.

And today, a lot depends on 1.3790 because dropping below it will provoke a further decline to 1.3750 and 1.3710. But if bullish traders manage to bring the quote to 1.3870, GBP/USD may rise towards 1.3930.