29.11.201910:32 Forex Analysis & Reviews: Fears of inflation (A review of EUR/ USD and GBP/USD on 11/29/2019)

While the Americans were sitting at the festive table and butchering their turkey, a number of quite interesting data was published in Europe. Thus, data on consumer lending showed an acceleration in its growth rate from 3.4% to 3.5%. However, this result is already expected, so no one was surprised. In addition, the data itself is not so important, and therefore, unable to exert any influence on the market. Nevertheless, there were a lot of interesting data from the eurozone countries besides this. Especially in Germany, where preliminary data on inflation were published, showing that it remained unchanged, although they expected acceleration from 1.1% to 1.3%. But these data are preceded by similar data for the entire euro area, and if the data turned out to be worse than forecasts in Germany, it is clear that you should not expect anything good from the pan-European ones. Besides, the decline in producer prices in Italy accelerated from -1.6% to -3.0%. And that makes it doubly sad when you realize that we are talking about the third economy of the euro area. Meanwhile, in the fourth economy of the euro area, that is, in Spain, preliminary data on inflation were also published, showing its growth from 0.1% to 0.4%. This, of course, is wonderful, but it still can not be compared with the data for Germany. Well, if we are to be completely meticulous, then we have the inflation in Belgium which slowed down from 0.5% to 0.4%. and this is not preliminary data, but quite the final ones. Moreover, I suggest looking at Ireland, not the North one, but the Republic, where the growth rate of retail sales slowed down from 3.8% to 3.0%. In the bottom line, the picture is clearly depressing except for Spain. But without their American colleagues busy celebrating Thanksgiving, European traders did not dare to take any steps.

The Americans rested so they are now ready to join the battle. Moreover, in the financial world, nothing happens at all without them. So, the focus will be on preliminary data on inflation in Europe, which should show its acceleration from 0.7% to 0.9%. However, exactly the same forecasts were even before the publication of inflation data in Germany, which turned out to be worse. Thus, the idea suggests itself that the data for the entire euro area will be slightly worse than forecasts. At the same time, inflation is at an extremely low level, and if it continues to grow much slower than forecasts and plans, this increases the risk of further easing of the monetary policy of the European Central Bank. As a result, a single European currency may be under pressure. But in addition to inflation, there will also be published data on unemployment, which should remain at the same level, 7.5%.

Inflation (Europe):

Along with this, there is a lot of data on the countries of the euro area today. Thus, it is already known that the growth rate of retail sales in Germany slowed down from 3.4% to 0.8%, which, combined with stable inflation, does not represent the most promising prospects. In addition, German labor market data will also be published, and the unemployment rate is expected to remain unchanged. However, as we hope for the best, it was given by the data for France, which showed an acceleration of inflation from 0.8% to 1.0%, while the acceleration to 0.9% was predicted. Therefore, it is likely that the pan-European data will still turn out to be as predicted. At the same time, the final data on French GDP for the third quarter confirmed the fact of a slowdown in economic growth from 1.4% to 1.3%. We are also waiting for data on inflation and unemployment in Italy, which may please investors. The fact that preliminary data on inflation can show its acceleration from 0.2% to 0.3%, and the unemployment rate should decrease from 9.9% to 9.8%. As we can see, the data on the largest economies of the euro area are clearly mixed, although they are not as important as the pan-European ones.

Retail Sales (Germany):

The UK data is also of great interest, although everyone is now busy in the United Kingdom with pre-election battles and blaming their opponents for all conceivable and unimaginable sins. However, this does not negate the importance and significance of the real situation in the economy. So, the volume of consumer lending should be 900 million pounds against 828 million pounds in the previous month. Of course, credit growth is good, as it indicates an increase in consumer activity. However, the number of approved mortgage applications should be reduced from 65,919 to 65,500. Now, the reduction in the number of mortgages will clearly outweigh the growth in consumer lending given the enormous importance of the real estate market for the British economy.

Mortgages Approved (UK):

Thus, if we assume that inflation in Europe will accelerate exactly as expected, then a single European currency can grow to 1.1025. However, if the forecasts are not confirmed, then we should expect a decline to 1.0975.

The pound will be under pressure due to its own data on mortgage lending, and thus, it is worth waiting for it to decline to 1.2825.