There is no doubt that yesterday's macroeconomic statistics in Europe were very positive. The only exception is the final data on GDP in Italy for the fourth quarter, whose pace of economic decline rose from -5.2% to -6.6%. However, this was already known since the publication of preliminary data, so the deepening recession in the third economy of the euro area was not surprising. Nevertheless, the European producer prices data surpassed all the expectations. Their decline, which lasted for almost a year and a half, has stopped. The rate of decline was expected to slow down from -1.1% to -0.3%, but they showed zero change in annual terms. This means that inflation retains its growth potential, since producer prices are a leading indicator for consumer prices. Aside from that, the business activity index in the service sector rose to 45.7 points, instead of the forecasted decline from 45.4 points to 44.7 points. The composite business activity index also rose from 47.8 points to 48.8 points, although it was only expected to increase to 48.1 points.

However, Germany's business activity indices were somewhat disappointing. The service sector fell to 45.7 points, against the forecasted decline from 46.7 points to 45.9 points. In turn, the composite index of business activity in the country rose from 50.8 points to 51.1 points. This was supported by the sharper growth in the manufacturing PMI, which was published on Monday. Now, we expect it to rise to 51.3 points. However, this was more than offset by data from other major economies in the Eurozone, where data on business activity indices turned out to be significantly better than forecasts.

Let's take France as an example. Its business activity index in the service sector declined to 45.6 points instead of falling from 47.3 points to 43.6 points. The composite index of business activity also fell from 47.7 points to 47.0 points, against the expected decline to 45.2 points. On the other hand, Italy decided to recover itself from the weak GDP data and showed a sharp growth in business activity indices. It rose from 44.7 points to 48.8 points in the services sector, and from 47.2 points to 51.4 points in the composite index. We expected growth to 47.1 points and 49.0 points, respectively.

Producer Price Index (Europe):

Based on the data, everything is fairly good in the Eurozone. But what about the situation in the UK? Here, the business activity index in the service sector rose from 39.5 points to 49.5 points. The composite business activity index also did from 41.2 points to 49.6 points. As we can see, this is an impressive growth, but people expected a little more.

The business activity index in the service sector was expected to rise to 49.7 points, and the composite index to 49.8 points. So although everything is fine, it is not as good as we would like.

Composite PMI (UK):

However, the market ignored this data and just stood still. Moreover, even the US statistics were not given attention. The Euro declined exactly between the publications of European and American data, although the US statistics were also quite good. We can say that employment only rose by 117 thousand, which is slightly less than the expected 155 thousand. But this is still growth, which means that the labor market continues to recover. In addition, the index of business activity in the service sector increased from 58.3 points to 59.8 points, instead of 58.9 points. The composite PMI, which was expected to rise from 58.7 points to 58.8 points, also did to 59.5 points.

Composite PMI (United States):

In some way, certain fears caused the lack of direct reaction, as well as investors' cautious attitude towards the euro and the pound. In particular, the rise in consumer prices will lead to a sharp drop in consumer demand, a further decline in company profits and an even greater unemployment growth. As a result, Europe will slide into deflation again. Therefore, the current focus is this very consumer activity, which is best characterized by retail sales data, which is published today. The data is only for January, while the preliminary inflation data were published already for February. However, it was in January that deflation was replaced by a sharp growth in consumer prices. So, at the moment, retail sales are growing by 0.6% year-on-year. This is based on the results of December, when Europe's consumer prices declined by -0.3%. Most likely, retail sales fell by -1.2% at the end of January, when inflation was 0.9%.

These are the results that are predicted, which means that there is no positive effect from the price growth. On the contrary, consumer demand in Europe is so weak that any rise in prices automatically leads to an even more noticeable contraction of this very demand. In general, if the data coincide with the forecasts, then everything will lead to a gloomy scenario. Moreover, the unemployment rate could rise from 8.3% to 8.4%. That is, the rise in prices was not only affected by an immediate drop in demand, but also by an increase in unemployment. It turns out that the financial situation of companies and employers is such that even without any time lags, a decline is felt in demand and revenue. In this case, the prospects for European currencies look rather vague.

Retail Sales (Europe):

As for the United States, the market may receive another confirmation of the sharp recovery of the labor market ahead of the US Department of Labor report. Here, the number of initial applications for unemployment benefits is expected to fall from 730 thousand to 715 thousand. The number of repeated applications, in turn, may also do so from 4,419 thousand to 4,150 thousand.

Number of re-claims for unemployment benefits (United States):

The EUR/USD pair is showing a downward interest again after it found the resistance level around 1.2090/1.2110. We can assume that yesterday's decline can be prolonged towards the main support level of 1.2000, if the quote holds below 1.2040.

The GBP/USD pair continues to follow the area of the psychological level of 1.3950/1.4000/1.4050, trying to work it out as a resistance. A downward movement towards the range of 1.3870-1.3800 in the market is not excluded.