Over the past week, the dollar managed to slightly strengthen relative to the single European currency. The pound continued its rapid growth and with heightened force.
On the one hand, the pound had a reason for growth - inflation. It accelerated from 2.6% to 2.9%, and the producer price growth rate increased from 3.2% to 3.4%. Also, the unemployment rate dropped from 4.4% to 4.3%, and the number of applications for unemployment benefits decreased by 2.8 thousand. The growth rate of wages remained unchanged and they are seriously inferior to inflation. But this is not enough for such a sharp growth in the pound. Moreover, the Bank of England left the refinancing rate unchanged, and for its increase, only two members of the board are supporting it. However, the Bank of England hinted that it could soon begin to tighten monetary policy, since the accompanying commentary indicates that the incentive measures have already weakened. The regulator plans a gradual increase in the refinancing rate, although it is unclear when this will exactly happen. Nevertheless, against the backdrop of the ECB's hesitancy, as well as doubts about further actions of the Fed, this is something.
In Europe, no critical data was released, except for the figures for industrial production, the growth rate of which has increased from 2.8% to 3.2%.
In the US, there were no significant data. Thus, the number of open vacancies increased from 6,116 thousand to 6,170 thousand. Inflation accelerated from 1.7% to 1.9%, and the growth rates of producer prices increased from 1.9% to 2.4%. In turn, the growth rate of industrial production decreased from 2.4% to 1.5%, and retail sales from 3.5% to 3.2%. Therefore, the obscure statistics make it possible to understand why the dollar remained relatively stable compared to the single European currency.
Data on inflation in Europe came out, which coincided with a preliminary estimate. It states that inflation accelerated from 1.3% to 1.5%. But against the background of the ECB's apparent reluctance to raise the refinancing rate, this did not have much effect. And given that neither in Europe, nor in the UK, this week will not release any significant data. The market will focus on the United States. Although you can pay attention to data on retail sales in the UK, where their growth rate could slow from 1.3% to 1.1%. This can be an excellent reason for a correction for the pound.
The main event of the week will be the meeting of the Federal Reserve Committee on open market operations. Of course, the Fed will not raise the refinancing rate. However, everyone is worried about the further actions of the regulator. If the Fed confirms its commitment to its plans for further tightening of monetary policy, the dollar will be able to win back its losses. The only question is whether the Fed will raise the rate in December, as today there are too many doubts regarding the prospects for such a step. And this comes despite a growth in inflation.
In addition, in the US, there will be a lot of data on the housing market, which can help the dollar. So, although the number of issued construction permits may decrease from 1,223 thousand to 1,200 thousand, the number of construction projects should increase from 1,155 thousand to 1,175 thousand. It is also expected that the number of home sales in the secondary market will increase from 5.4 million to 5.5 million.
For the most part, everything depends on the outcome of the meeting of the Federal Reserve Committee on open market operations. If it becomes clear that the Fed will raise the rate in December, then the euro/dollar pair will drop to 1.1800, and the pound/dollar pair to 1.3375. Otherwise, we can expect the euro to grow to 1.2000, and the pound will be able to consolidate at 1.3600.
