The British pound strengthened its position in pair with the US dollar and continues to update highs against the background of yesterday's statements made by British Prime Minister Theresa May. She announced her intention to apply for an additional delay of Brexit. This was done under the pretext of coordination with the opposition Labor Party of the country's exit plan from the European Union.
During the presentation, May said that the UK needs a longer delay for Brexit, adding that the time for debate and disagreement was over. The Prime Minister wants to have time to agree on a plan for leaving the EU with the Labor Party, which should include an agreement on Brexit. Only this will allow counting on the approval of the agreement by the Parliament. May also noted that she would try to get the approval of the Parliament before the elections in Europe, which will be held on May 22.
Yesterday's data on a weak PMI purchasing managers index for the UK construction sector put only temporary pressure on the pound. According to the report, construction PMI in March 2019 amounted to 49.7 points against 49.5 points in February. Finding an index below the key level of 50 indicates that activity in the sector continues to decline.
Today, we expect an important report on the service sector, which could lead to a sharp increase in the volatility of the pound. In the case of weak indicators, the pressure on the GBPUSD pair may return.
The European currency slightly regained its position against the US dollar after the release of a weak inflation report. According to the data, PPI eurozone producer price index in February of this year grew by only 0.1% compared with January and 3.0% compared with February 2018. Economists had forecast that producer prices in the eurozone would rise by 0.1% and 3.1%, respectively. As for the basic index excluding energy, it remained unchanged in February compared with January and grew by only 1.2% year-on-year.
Weak inflation is another reason to take the time to raise interest rates in the eurozone, which almost no one talks about already.
Data on the US economy also leave more questions than the answer. An important indicator such as the demand for durable goods in the United States has declined, which is a bad sign.
Although the fall was due to a sharp decline in orders for civil aircraft, orders for goods with a service life of at least three years in February decreased by 1.6% compared with January and amounted to 250.58 billion US dollars. Economists had expected orders to decline by 2.1% in February. The US Department of Commerce also reported that orders for civilian aircraft dropped immediately by 31%.
According to the Retail Economist-Goldman Sachs, the index of sales in US retail chains fell by 1.2% from March 24 to 30 compared to the previous week. Compared to the same period of the previous year, sales increased by 0.9%. Retail Economist noted that sales have remained almost unchanged over the past two months.
Let me remind you that on Monday, data from the US Department of Commerce came out, where retail sales declined, indicating a drop in consumer activity.
As for the technical picture of the EURUSD pair, further growth is required to keep above the support level of 1.1215, from which the bulls will try to build a new upward wave of risky assets growth, with the maximum in the area of 1.1270 and 1.1330. When returning to the support level of 1.1215, buyers will take the initiative only after retesting the low of this month in the 1.1185 area, or already from the larger support areas of 1.1120 and 1.1035.
The material has been provided by InstaForex Company - www.instaforex.com