The data on business activity indices in the Eurozone, Germany and the United States, released on Friday, point to pronounced signs of slowing economic growth. This has already given rise to investors' opinion that the ECB may never decide to start the process of raising interest rates next year, and the Fed will make the first pause in the last year's increase in interest rates.
According to the presented data, the German manufacturing activity index (PMI) in November fell to 51.6 points against 52.2 points a month earlier. In this case, the expected growth rate to 52.3 points. The business activity index in the services sector dropped to 53.3 points from 54.7 points, while the forecast of a decline to 54.6 points. The same indicators for the eurozone showed the following dynamics, the PMI in the manufacturing sector fell to 51.5 points from 52.0 points while expectations of a sustained growth rate of 52.0 points, the business activity index in the services sector fell to 53.1 points against 53.7 points.
In the wake of this data, the single currency came under pressure against major currencies and the US dollar.
The data of the same indicators, but only for the United States, did not put pressure on the dollar, although they also came out weaker than forecasts. The business activity index in the manufacturing sector (PMI) in November fell to 55.4 points from 55.7 points against the forecast of an increase to 55.8 points. The business activity index in the services sector dropped to 54.4 points from 54.8 points against the expected increase to 55.0 points.
The question arises, why did the dollar rise against major currencies? In our opinion, the function of the dollar as a safe-haven currency played an important role against the background of slowing economic growth in Europe and the United States, as well as the risk of continuing the US-Chinese trade war that still hangs over the markets and may still not be solved at the summit G20 in Argentina, which will be held later this week. Given this probability, we can assume that the dollar will continue to consolidate against major currencies by the end of the week.
Forecast of the day:
The EUR / USD currency pair is trading below the level of 1.1355, recovering in the wake of partial profit taking. The pair may continue to fall to 1.1265 if the data published today from Germany turns out to be weaker than forecasts, and a comment from M. Draghi will make it clear that the ECB, given the current situation, will not be in a hurry with the rate hike in the new year.
The USD / JPY currency pair is trading below the mark of 113.30, generally remaining in the "outset". It can turn down and fall to 112.65 if it stays below 113.30 amid rising concerns among investors about the growth prospects of the global economy.
