19.04.201813:15 Forex Analysis & Reviews: Demand for the euro is growing amid the weakness of the dollar

Germany

The growth of inflation in the eurozone was 1.3% in March, which is below the forecast of 1.4% and below the level of February. A slowdown in consumer price growth occurs against the backdrop of a general decline in business activity.

According to the ZEW analytical center, the economic sentiment in Germany fell to -8.2 p in April compared to the + 5.1 percentage point was recorded a month ago. ZEW associates a sharp decline in sentiment with weak economic data and fears about the escalation of the trade war. German companies face trade barriers that were not observed since the 2008 crisis, and the study was conducted even before Trump imposed protective duties on steel and aluminum which suggest a further decline in the index in May.

Such a sharp slowdown, coupled with a decrease in inflation, compels the ECB to review its priorities in terms of normalizing monetary policy. From the reduction of the asset repurchase program, the ECB is unlikely to refuse, since it is about the part of the program that is aimed at buying government bonds on the secondary market. However, the prospects for the growth of rates can be revised. At the moment, the markets proceed from the fact that the first increase will take place in the first quarter of 2019 but due to the worsening economic conditions, this may push this step back to the second or third quarter, which in the end will reduce the demand for the euro because of the growing spread of yields not in its favor.

Nevertheless, at the moment the euro paired with the dollar looks like a favorite. The EUR/USD pair is closer to the upper border of the wedge, testing around 1.2425 / 3, but whether it will be successful until it can not be said.

Britain

Sterling actively grew at the beginning of the week on the background of good macroeconomic data. The report on the labor market for the last 3 months turned out to be neutral-positive as the average wage growth rates remained unchanged at 2.8%. Yet, the unemployment rate fell from 4.3% to 4.2%, which was unexpected for analysts.

However, it turned out that growth was coming to an end on Wednesday. It is a key parameter of the state of the economy such as, the consumer inflation which fell to 2.5% in March against the forecast of 2.7 that led to sales of the pound.

There is also a decrease in consumer activity. The retail sales decreased by 1.2% in March while the annual growth was only 1.1% against 1.5%.

The pound has now exhausted the potential for growth, players will wait for a reassessment of the prospects for tightening monetary policy from the Bank of England at a meeting in May. Meanwhile, the consensus is to raise the rate by 0.25%, however, slowing inflation may requires adjustments to these plans.

The pound may fall within the correction to 1.4050 / 4100 with the prospect of leaving in the lateral range.

Oil

Oil prices again updated a three-year high, Brent overcame the mark of 73 dollars per barrel. and does not intend to stop. There are several reasons. Reserves of oil and petroleum products in the U.S. unexpectedly fell to a three-year low, the oil market as a whole is close to the balance. The achievement of which was as promised closer in May of this year.

There will be a scheduled meeting between Russia and the OPEC countries on April 20. The market will closely monitor the results of the negotiations since at the moment this is the most significant factor. If the parties do not announce the completion of the agreement in the near future, oil will continue to rise above $ 74 per barrel before this week ends.