12.07.201909:06 Forex Analysis & Reviews: EURUSD: The US budget deficit rose again to record highs. The prospect of growth in risk-weighted assets under threat

The US dollar returned some of the lost positions on Wednesday against the euro and the pound after the release of the report, which showed that consumer prices in the US in June this year, though not significantly, increased, signaling the possible stabilization of inflationary pressure.

According to the US Department of Labor, the consumer price index (CPI) rose 0.1% in June 2019 compared to the previous month, while economists had expected inflation to remain unchanged. The maximum increase in prices was recorded for clothing and used cars.

As for the basic index, which does not take into account volatile categories, it increased by 0.3% in June compared to May, even though energy prices fell.

Exchange Rates 12.07.2019 analysis

Compared to the same period of the previous year in June, the consumer price index rose by 1.6% and the base prices increased by 2.1%.

Good data on average earnings growth also helped the dollar. According to the data, taking into account the correction for inflation, the average hourly earnings in the US increased by 0.2% compared to May and by 1.5% compared to the same period of the previous year.

Data on the US labor market continue to please traders. According to a report by the US Department of Labor, the number of initial jobless claims for the week from June 30 to July 6 decreased by 13,000 to 209,000. Economists had expected the number of applications to be 224,000.

The US budget deficit report, which continued to grow, was completely ignored by markets.

According to the US Treasury Department, the budget deficit increased by 23% from October to June this year compared to the same period last year.

Total government revenues amounted to 2.6 trillion dollars, showing an increase of 3%. But the growth in spending was much higher and amounted to 3.3 trillion dollars, an increase of 7%.

Thus, once again, the government's revenues and expenditures reached new record levels, and the total US budget deficit for the first 9 months of the fiscal year amounted to $747 billion.

For 12 months, the budget deficit amounted to 919 billion dollars, an increase of 22.6% compared to the same period of 2019.

Federal Reserve Chairman Jerome Powell, speaking yesterday before the Senate Banking Committee, drew attention to the need for the US Congress to take a decision and promptly raised the debt ceiling.

As for the technical picture of the EURUSD pair, the further direction of the trading instrument remains a big question, as market expectations, after yesterday's inflation data, diverged again.

The breakout of the resistance of 1.1280 will provide the euro with a new bullish momentum, which will lead to the renewal of highs in the area of 1.1310 and 1.1340. If the pressure on risky assets continues, then support can be expected in the area of 1.1230, but larger levels are seen in the range of 1.1200 and 1.1160.

*A análise de mercado aqui postada destina-se a aumentar o seu conhecimento, mas não dar instruções para fazer uma negociação.

Jakub Novak,
Especialista em análise na InstaForex
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