The picture of yesterday is repeated quite often lately. In the first half of the day, the dollar lost its position, and then completely won back. The ruble stands alone, which strengthened its position all day both at the expense of the tax period and due to the fact that the factors that led to the weakening of the pound and the single European currency do not concern the ruble in any way. The dollar began to fall in price immediately after the publication of data on the labor market in the UK, which seriously exceeded the expectations of market participants. Of course, the number of applications for unemployment benefits increased from 14.2 thousand to 18.5 thousand. Moreover, the previous data was revised for the worse, from 8.7 thousand to 14.2 thousand. The unemployment rate itself remained unchanged, and the growth rate of average wages did not decrease, but accelerated. Thus, the growth rate of the average wage excluding bonuses increased from 2.9% to 3.1%, with a slowdown forecast to 2.8%. And what employers like most of all is the rate of growth of average wages, taking into account premiums, accelerated from 2.6% to 2.7%, while a slowdown was expected to 2.4%. So, there were plenty of reasons for optimism. In the second half of the day, the dollar began to rapidly gain points, which was largely due to American statistics. In particular, the number of open vacancies increased from 7,077 thousand to 7,136 thousand. The rate of growth in industrial production accelerated from 4.9% to 5.1%, although the use of production capacity remained unchanged.
We have to admit that the importance of yesterday's American statistics is not that great. Especially when compared with data on the labor market in the UK. So, on their own, they could not have caused the strengthening of the dollar, but clearly could have contributed. The main factor in the strengthening of the dollar, especially in relation to the pound and the single European currency, was politics. A meeting of the heads of state of the European Union will be held today, during which the course of negotiations with the United Kingdom on Brexit will be discussed. As luck would have it, Donald Trump spoke yesterday on this issue, and it is best to quote his words:
"Unfortunately, the report on the state of the Brexit talks by Michel Barnier that I received today does not give grounds for optimism before the upcoming Brexit summit on Wednesday. The only hope for reaching an agreement is provided by the goodwill and determination of both parties."
In other words, for the time being, there is no question of any agreement. A UK release date from the European Union is getting closer and closer. From the point of view of investors, a bad agreement is better than its absence.
Besides the summit, today is an extremely busy day. In particular, in the United States, there are data on construction, which can show an increase in the number of building permits issued by 2.5%, while the number of construction projects started should be reduced by 3.5%. The main event will be the publication of the minutes of the meeting of the Federal Commission on Open Market Operations. Many fear that it will hint at the possibility of revising the rate of increase in the refinancing rate. Do not forget that the meeting took place before the publication of data on inflation, which showed a serious decline. Long before, even preliminary data appeared. Moreover, the Fed is an extremely conservative organization and will not make hasty decisions based only on monthly data. While there is no reason to believe that the slowdown in inflation is sustainable, the Fed will not take any drastic steps. Thus, the content of the minutes of the meeting of the Federal Commission on Open Market Operations is more likely to support the dollar.
In Europe, however, there are final data on inflation, which should confirm the fact of its acceleration from 2.0% to 2.1%. Given that the preliminary data is already taken into account by the market, the final data will not have a significant impact on the market. Also in Europe, it is expected to slow the growth of the construction sector from 2.6% to 1.7%. And, of course, we should not forget about the Brexit summit, the results of which are more pessimistic. So, the single European currency will have to fall to 1.1500.
The pound will also be sensitive to what is happening during the summit, so that you can wait for its growth only in the case of some major force. Although the pound may receive some support from the data on inflation, which should show its growth from 2.7% to 2.8%. So, the pound will look a little better than the single European currency, but it will still decline, and the benchmark looks at 1.3125.
In Russia today, there are data on unemployment and producer prices, but, unfortunately, they do not affect the mood of market participants. Nevertheless, unemployment is expected to rise again, this time from 4.6% to 4.7%. The rates of growth in producer prices should obviously slow down, since at the moment, they are growing by 15.3%. Although inflation has begun to grow slightly, it is still significantly lower than the growth rate of producer prices. It is safe to say that the rapid rise in producer prices has already contributed to the growth of inflation and now the opposite trend will be observed. So, investors may be somewhat disappointed with macroeconomic data. Nevertheless, the main factor is the tax period. However, the expected strengthening of the dollar against the euro and the pound will put pressure on other currencies, so a slight weakening of the ruble can be expected. It is necessary to take into account the fact that the main factor, namely the publication of the text of the minutes of the meeting of the Federal Commission on Open Market Operations, will occur after the close of trading in the ruble. The Brexit summit will clearly support the dollar, and it will be able to rise to 65.50 rubles.
