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On Friday, the euro remained to trade in the side channel in pair with the US dollar, despite a number of important fundamental data, which was published that day.
In the first half of the day, a report was released, which indicated that the annual inflation in the eurozone in June remained below the target level set by the European Central Bank. This only strengthened the expectations of market participants in the fact that further measures to stimulate the economy will be introduced soon. Let me remind you that the task of ECB President Mario Draghi is a stable inflation rate just below 2%, which is also an important benchmark for the Central Bank.
According to the EU Statistics Agency, the consumer price index (CPI) of the eurozone in June 2019 increased by only 1.2% compared to the same period last year after an increase of 1.2% in May. As for core inflation, it increased by 1.1%. It is expected that the annual rate of price growth in 2020 in the euro area will be on average 1.4%, which, as we can see, falls short of the target level.
As for the data on the US economy, they were both positive and negative. On the one hand, there has been an increase in spending by Americans, which will support the economy in the future. On the other hand, the decline in us household sentiment in June this year will definitely have a negative impact on the overall GDP growth rate.
According to the US Department of Commerce, US households were actively spending money in May 2019. Thus, personal household spending increased by 0.4% compared to April. Data for April were also revised upwards to 0.6%, while previously reported a growth of 0.3%.
Not surprisingly, the increase in spending was directly due to an increase in the welfare of Americans. According to the data, revenues in May increased by 0.5% compared to the previous month. Economists had expected a 0.3% increase in revenue and a 0.5% increase in spending.
Given the data above, the PCE personal consumption spending price index, preferred by the Fed as an inflation indicator, rose 0.2% in May compared to the previous month. The index, which does not take into account food prices, also increased by 0.2% compared to April, which fully coincided with the forecasts of economists.
A number of negative data did not allow Friday to begin strengthening the US dollar.
According to the data, the Chicago Purchasing Managers Index (PMI) in June 2019 fell to 49.7 points, being below 50, indicates a decline in activity. In May, the index was at the level of 54.2 points. The main decline was due to problems in the manufacturing sector, as well as a reduction in orders.
As noted above, US household sentiment worsened in June 2019. According to the University of Michigan, the final consumer sentiment index in June was 98.2 points against 100.0 points in May. Economists had expected the index to remain unchanged in June.
As for the technical picture of the EURUSD pair, the pressure on the euro is gradually returning, and the breakthrough of support of 1.1350 only returned to the market sellers of risky assets. The goal of the bears is to test the support of 1.1310, below which the lows are opened from June 21 – 1.1285 and June 20 – 1.1225. In the scenario of bullish attempts to regain the market position, the upward correction will be limited to the highs of 1.1350 and 1.1370.
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