What happened to the pound is almost completely the repeated the behavior of the euro, only the pound was strengthened much stronger. Just like in the situation with the euro, the whole thing is about geopolitical tensions, which, it seems, have reached their peak. New sanctions against Russia could not affect the situation, but the exorbitant growth of militancy, as well as the massive missile attack on Syria, which could have affected the Russian armed forces, clearly did not add confidence to investors. It's one thing to impose sanctions and another to open up a possibility of a direct military clash with the world's largest nuclear power country.
However, if you look at the statistics, everything is pretty good in the US. The rate of producer price growth accelerated from 2.8% to 3.0%, and inflation rose from 2.2% to 2.4%. So there is no doubt that the Fed will fulfill its promise to double the refinancing rate twice before the end of this year. The data on the labor market was somewhat disappointing, as the number of applications for unemployment benefits increased by 44 thousand. This was due to an increase of 53 thousand repeated applications, which indicates the growth of long-term unemployment. This is an extremely bad signal. However, given the data on inflation, investors could not afford to pay attention to this annoying moment. Meanwhile, the growth rate of industrial production in the UK accelerated from 1.2% to 2.2%, which was the reason for a more significant strengthening of the pound in comparison with the euro.
In the UK, there are quite a lot of interesting and important data coming out this week. In particular, the unemployment rate should remain unchanged but the growth rate of wages can accelerate from 2.6% to 2.8%. However, what's more important is the wage growth with premiums which is likely to accelerate from 2.8% to 3.0%. It is the growth of salaries, taking into account premiums, that has a major impact on investment decisions, with a purely positive one. However, the pound will be under pressure due to the expected decline in inflation from 2.7% to 2.6%. In the US, it is expected that the growth rate of retail sales will accelerate from 4.0% to 4.2%. If we recall the growth of inflation, then the growth of retail sales further increases the profit of companies, so investors have a reason for joy. Significant growth is also expected both in the number of issued construction permits and in the new construction projects themselves. The growth rate of industrial production may slow down from 4.4% to 4.0%, which is quite expected, since the stockpile has been growing for quite some time. And now commercial reserves can increase by another 0.6%. Despite this, the negative impact will be mitigated by the expected reduction in the number of applications for unemployment benefits by 34 thousand.
However, as well as during the past week, good statistical data will only support the dollar a little, as the political situation is heated to the limit. The US announced new sanctions against Russia, and also intend to strengthen its military presence in Syria. Naturally, the growing confrontation between the United States and Russia will have a negative impact not only on the ruble, but also on the dollar to a much lesser extent. Thus, it is worth waiting for the further growth of the pound to 1.4375.
