EUR USD. US data supported the dollar

Index of business activity in the euro zone services rose from 52.8 to 52.9, while the composite index from 53.1 to 53.2, which was a complete surprise, since the expected reductions. In Germany, the index of business activity in the services sector rose from 53.7 to 54.4, the composite is from 54.4 to 55.3. The situation is similar in France, where the index of business activity in the services sector rose from 49.9 to 50.5, while the composite from 49.6 to 50.1. The important thing is that in France the PMI index rose above 50.0, which means improved business confidence. But retail sales have kept growth at 1.6% level, rather than to accelerate to 1.7%. Nevertheless, the single European currency has lost part of its position against the dollar.

The reason lies in the US statistics, in particular on the labor market, since, according to ADP data, the number of employees increased by 179 thousand. We expected a bit more modest growth, so that the dollar has become against this background strengthened against the euro, as employment growth increases the probability of increase refinancing. Also, the business activity index in the services sector remained unchanged at 51.4, and a component rose from 51.2 to 51.8. But the US Department of Energy data somewhat baffled. More precisely, the market reaction to the official data on stocks of crude oil and petroleum products was not quite the same as usual. The reserves rose by 1.4 million barrels, which once again is contrary to the American Petroleum Institute, but the market has completely ignored this fact, and the oil prices went up. In any case, the data on employment were the main driving force, contribute to the strengthening of the dollar.

Today we expect a slight decline in the number of primary and repeated applications for unemployment benefits, which will also contribute to the strengthening of the dollar. But the main event will be a meeting of the Board of the Bank of England’s monetary policy. It is expected that the refinancing rate in the UK will be reduced to 0.25%, and if these predictions are correct, then the dollar will get an additional impetus to growth.

Taking into account the expectations and projections, the euro / dollar to fall to 1.1075. If the Bank of England will keep rates unchanged, the pair will remain at the level of 1.1165.

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