What happened yesterday did not lend itself a logical explanation at all, since the dollar strengthened despite the macroeconomic data published. Of course, everything seems fine at first glance because the American statistics came out much better than expected since sales of new homes did not fall by 8.7% instead of increasing by 3.7%. Also, the business activity index in the services sector increased from 54.2 to 56.0 and the composite index from 54.4 to 55.5. Indeed, preliminary data showed their growth to 56.2 and 55.8, respectively, which means that the business activity index turned out to be worse than expected. However, in Europe, the data were much better than predicted. In particular, the British index of business activity in the services sector rose from 50.1 to 51.3 while waiting for its decline to 49.9. The European index of business activity in the service sector increased from 51.2 to 52.8 and a composite index from 51.0 to 51.9 but waiting for their growth only to 52.3 and 51.4, respectively. Also, if you look at France and Germany, the picture is even better. Thus, the business activity index in the service sector in France rose from 47.8 to 50.2 and the composite index from 48.2 to 50.4. In Germany, the index of business activity in the service sector increased from 53.0 to 55.3, while the composite from 52.1 to 52.8. Even in Italy, the index of business activity in the services sector rose from 49.7 to 50.4, although the pace of economic growth in Italy remained at the same level of 0.0%. Only in Spain that the index of business activity in the services sector fell from 54.7 to 54.5 but this is only the fourth euro area economy. However, most importantly, the growth rate of retail sales in Europe accelerated from 0.3% to 2.2%. Against this background, all the other combined indicators fade.
In an attempt to explain what happened with concerns about Brexit look pretty strange. It is true that the Labor Party declared its readiness to vote against secession from the European Union without an agreement, which naturally suits them first of all. Moreover, given that there is no such agreement, the likelihood of a very tough scenario of events is increasing, since the mechanism for Britain's exit from the European Union, which is in fact, already ongoing and it is unlikely to be stopped. It can only be slowed down and it is understandable that such news is purely negative for the pound and the single European currency, primarily due to the unpredictability of further developments but the news itself was recouped by the market on Monday; Even the reports of the readiness of China and the United States to sign a new trade agreement, which should end the trade war between the two largest economies in the world. This news was also taken into account by the market on Monday.
In a strange way, the active growth of the dollar began exactly at the moment when the data on sales of new homes came out. Of course, the data turned out to be quite good but they are dimmed against the background of European retail sales. At the time of publication, the market stood rooted to the spot. One gets the feeling that some players from among large investors were simply waiting for at least some formal reason for buying the dollar. Perhaps they know something about the upcoming meeting of the Board of the European Central Bank, which will be held tomorrow. Given the complete uncertainty, it is quite difficult to make any predictions. If large investors have already done everything they wanted, then the market will more adequately respond to statistics today, especially to ADP data on employment, which can show its growth by 189 thousand versus 213 thousand in the previous month.
Thus, if something inadequate does not happen again, the single European currency will be able to strengthen to 1.1350.
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