It is not for nothing that they say that fear has big eyes, because this very fear is destroying the single European currency. Investors were seriously worried that Christine Lagarde could repeat the focus of Mario Draghi, and during the first meeting of the European Central Bank as a chairman, she could lower the refinancing rate. However, this time it will become negative. Moreover, investors received another confirmation yesterday of their fears in the form of data on producer prices, the decline of which increased from -0.8% to -1.2%. Well, since producer prices are falling, it means that inflation has nothing to grow with. Moreover, Mario Draghi and Christine Lagarde diligently scare everyone with the fact that deflation is the main threat. Thus, a decrease in producer prices is a direct indication that this very deflation may well happen.
In fairness, it should be noted that if not for this very fear, then, in fact, there was no reason to weaken the single European currency. Rather, the opposite. Indeed, the JOLTS data did not show an increase in the number of open vacancies, but a decrease from 7,301 thousand to 7,024 thousand. In addition, the final data on business activity indices did not at all coincide with the preliminary estimate. In particular, the index of business activity in the service sector, which was supposed to grow from 50.9 to 51.0, unexpectedly fell to 50.6. A similar picture is with the composite business activity index, which fell from 51.0 to 50.9, although it was expected to grow to 51.2. On the other hand, ISM data showed continuous growth. Thus, the ISM index of business activity in the service sector grew from 52.6 to 54.7. Moreover, the ISM non-manufacturing employment index showed an increase from 50.4 to 53.7 while the index of new ISM orders in the non-manufacturing sector increased from 53.7 to 55.6. The only thing that can be regarded as negative from the ISM data is the non-production price index, which fell from 60.0 to 56.6. However, it is annoying that the ISM data is moving in a completely different direction from the Markit data, which suggests that someone is very wrong. It is not clear who exactly. Furthermore, when these data were published, the market stood rooted to the spot, completely ignoring them. It is not clear who exactly. Moreover, when these data were published, the market stood rooted to the spot, completely ignoring them.
Markit Composite Business Activity Index (United States):
In any case, it is clear that a rebound has clearly matured in the single European currency. Apparently, the market needs only an excuse, and today's data on retail sales in Europe is well suited for its role. The growth rate of which should accelerate from 2.1% to 2.5%. The increase in consumer activity does not just compensate for the decline in producer prices, but also indicates that this may turn out to be only a temporary phenomenon. If consumers make purchases more actively, then there is every reason to believe that inflation will increase. Thus, this means that there is hope that the European Central Bank may hold back the decision to lower the refinancing rate.
Retail Sales (Europe):
At the same time, some data on Europe has already been released. In particular, the decline in production orders in Germany slowed down from -6.5% to -5.4%, which of course looks sad, but at least the dynamics are encouraging. But in Spain, the growth rate of industrial production slowed down from 1.4% to 0.8%. And the index of business activity in the service sector of Spain fell from 53.3 to 52.7. Today, data on business activity indices are still being published. So, in Germany, the index of business activity in the services sector should fall from 51.4 to 51.2, while the composite may grow from 48.5 to 48.6. In France, they expect an increase in the index of business activity in the services sector from 51.1 to 52.9, which may allow the composite index of business activity to grow from 50.8 to 52.6. In addition, the growth rate of retail sales in France should accelerate from 2.3% to 3.2%.
Retail Sales (France):
Today, the United States will not please us with any data worthy of attention, so a single European currency can rely solely on its own statistics, which, apparently, are more likely to be positive. Therefore, the single European currency has good chances to grow to 1.1100 - 1.1125.
A pound stands rooted to the spot, and nothing seems to be able to move it off the ground. Thus, investors express their complete lack of understanding of what is happening in the United Kingdom. Most likely, investors do not understand what to expect from the upcoming elections. Due to this, we need serious factors that can move the pound, although they are not observed while on the horizon except for the truth tomorrow's meeting of the Bank of England board. Consequently, the pound will continue to remain in the region of 1.2875.
