The euro and pound continue to decline against the US dollar. It is expected that the European Central Bank, especially after yesterday's inflation data in Germany, may resort to a larger stimulus to the economy. Let me remind you that just recently, the former Managing Director of the International Monetary Fund Christine Lagarde, who was nominated for the post of President of the ECB, in an address to the European Parliament said that the Central Bank has space to reduce interest rates.
Thus, neither the current President of the ECB nor the future, do not see obstacles to the return of the stimulus program of the economy. Given that there is nowhere to reduce rates, there is only the launch of the bond buyback program, which was recently curtailed.
Pound buyers are also optimistic and waiting for a response from British lawmakers on the topic of blocking Brexit without a deal with the EU. But more on that below.
EURUSD
Despite the fact that data on the US economy did not greatly delight traders, this did not scare away potential buyers of the US dollar.
According to the report, the growth of the US economy in the 2nd quarter of this year was weaker than previously reported. According to the US Department of Commerce, US GDP in the 2nd quarter grew by only 2.0% per annum, while previously reported a growth of 2.1%. Economists had expected the second estimate of US GDP growth to be 2.0%. However, it should be noted the growth of corporate profits, which can stimulate investment.
Thus, profit after tax increased by 4.8% compared with the previous quarter. In the 1st quarter of 2019 and in the 4th quarter of 2018, the companies' profits decreased. The growth of consumer spending in the USA in the 2nd quarter also provided good support to the economy, which alleviated the blow from the uncertainty in US foreign trade policy.
Weekly data on the US labor market went unnoticed. According to a report by the US Department of Labor, the number of initial applications for unemployment benefits for the week from August 18 to August 24 increased by 4,000 to 215,000. Economists had expected the number of applications to be 215,000. The moving average fell by 500 to 214,500 and the number of secondary applications for unemployment benefits rose to 1,698,000.
Data on the housing market continue to indicate not the best situation in the sector. Despite the low mortgage rates, buyers are in no hurry to return to the market, waiting for more favorable conditions after another series of interest rate cuts by the Federal Reserve this fall.
Thus, according to the report of the National Association of Realtors, the index of signed contracts for the sale of housing in July 2109 decreased by 2.5% compared to the previous month and amounted to 105.6 points. Compared to the same period of the previous year, the index fell by 0.3%. Economists had expected the index to fall by 0.5% in July.
Let me remind you that last week, a report was released on home sales in the US secondary market in July, which rose slightly. The average flat rate on 30-year mortgages in the US is now 3.58%.
As for the technical picture of the EURUSD pair, the pressure on the euro will gradually slow down by the end of the week, and traders will hurry to fix profits. The maximum that sellers of risky assets can expect today is a support update of 1.1020, which may occur after the release of a weak report on the eurozone consumer price index. If buyers are able to regain the level of 1.1060, which was missed yesterday, a larger growth of the trading instrument in the area of 1.1090 is not excluded.
GBPUSD
The pound froze in anticipation of further action by British lawmakers, who believe that the best way to prevent the UK from leaving the European Union without any agreement is the adoption of the relevant law.
To prevent the British Prime Minister's actions aimed at the UK leaving the EU without a deal, a representative of the Liberal Democrats party proposed to pass a law excluding withdrawal from the EU without an agreement, as a measure to impose a vote of no confidence in the government of Boris Johnson is not productive.
However, the pound fell today before the opening of the European session after a report was released indicating that British consumers have become more pessimistic about the state of the UK economy and their personal finances. According to Gfk, the consumer confidence index fell to -14 points in August this year, while the average forecast of economists was reduced to the growth of the index to -10 points.
As for the technical picture of the GBPUSD pair, while trading is below the resistance of 1.2250, the bears will control the market, but for their absolute victory, a break of the minimum of 1.2150 is required, which will testify to the formation of a new downtrend that can return the trading instrument to the low of 1.2100 and 1.2060.
