This may sound surprising and even wild, but all macroeconomic data came out significantly better than expected yesterday. It is also interesting that various macroeconomic data were published both in Europe, including Great Britain, and in the United States, where they greatly pleased investors. This really happens extremely rarely, which is probably only on very large holidays. We can say that it was a belated gift for Independence Day. But the most interesting thing is that, despite this, the single European currency and the pound behaved completely differently.
Thus, the single European currency began to grow from the very opening of trading – not in Europe, but in Asia. During the European session, this same growth only continued. To some extent, this can be attributed to playing back Friday's data on business activity indices, which remained unattended due to the lack of American market participants. They had a holiday to celebrate Independence Day. But if this is so, then the influence of this particular factor is extremely insignificant, since the pound stood still under the same incoming conditions. So the strong growth of the single European currency was largely due to the expectation of the publication of European statistics that did not disappoint investors. It all started with an index of business activity in the construction sector, which was supposed to grow from 39.5 to 46.0. But it rose to 48.3. The highlight of the program in the form of retail sales also came, which showed an increase of as much as 17.8% in May with an expected growth of only by 14.8%. As a result, if we look at the annual data, the rate of decline in retail sales slowed from -19.6% to -8.6%, and to -5.1%. This is still a decline, but there is a visible trend towards a recovery in consumer activity. And this is necessary for economic recovery. Therefore, the optimism of the single European currency is quite justified.
Retail Sales (Europe):
British statistics are also pleasing. Whether you like it or not, the index of business activity in the construction sector rose immediately from 28.9 to 55.3, although we expected a slightly more modest growth, just to 45.0. But we are talking about the construction industry, which is directly linked to the real estate market, which is one of the main criteria for determining the investment attractiveness of the United Kingdom. Moreover, the UK, in contrast to the Euro zone or the United States, confidently demonstrates growth in business activity indices above the 50-point mark that separates stagnation from growth. So it turns out that so far only British business sees growth prospects. In addition, the rate of decline in new car sales slowed from -89.0% to -34.9%. This was also better than the forecast -36.0%, just a little better, though. However, if after all this you can talk about the growth of the pound, then you need to look at this growth through a magnifying glass. Whatever you say, but all these data really play against the background of retail sales, as they are only indirect data.
Business Activity Index in the Construction Industry (UK):
The US session was accompanied by a very symbolic rebound, especially when it comes to the pound. But it is much more noticeable on the chart of the single European currency. The reason for this rebound lies in the index of business activity. So, in the service sector, this same index of business activity grew from 37.5 to 47.9. The composite index of business activity also increased to the same 47.9, however, from 37.0. It should be noted that in the service sector, the index was supposed to grow to 46.7, and the composite index to only 46.8. But the fact that the rebound turned out to be largely purely symbolic, demonstrates that all kinds of indices, from the point of view of investors, fade against the background of real macroeconomic indicators especially when it comes to retail sales.
Composite Business Activity Index (United States):
Today, practically nothing is published, and the only thing you can pay attention to is the JOLTS data on open vacancies in the United States. The number of these very vacancies should be lowered from 5,046 thousand to 4,500 thousand. Of course, this decline can be interpreted as the fact that many employers, especially those from small and medium-sized businesses, simply went bankrupt, which is an extremely negative factor. And against the background of all kinds of restrictions introduced, removed, and then re-introduced, due to the coronavirus, such an explanation is almost the only true one. However, these data will be perceived differently today. It's all in a recent report by the United States Department of Labor, which reflected a significant decline in unemployment. So the data will be regarded precisely in the light of the contents of this report itself. Like, the number of open vacancies is reduced for the simple reason that people find new jobs. In other words, the data will be perceived as moderately positive. Moderate for the reason that they are in the logic of the report of the United States Department of Labor, which is already taken into account by the market.
Number of Job Openings JOLTS (United States):
During a local surge in activity, the euro/dollar pair managed to increase to the level of 1.1350, where it slowed down on a systematic basis and, as a fact, rebounded to 1.1300. It can be assumed that if the price consolidates below the level of 1.1290, the downward trend may resume, directing the quote to the lower border of the range of 1.1180. An alternative scenario will be considered if the price consolidates above 1.1350.
The pound/dollar pair was not so active and continued to fluctuate along a variable level of 1.2500, forming as a fact an accumulation within 1.2480/1.2520. It can be assumed that stagnation will soon subside and a local surge of activity will occur, where the best tactic is to break the established boundaries.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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