The US dollar fell against the euro and the British pound amid a report on the growth of the US economy, which showed the weakest expansion since 2016. The main problem was the slowdown in consumer spending growth, as well as the reduction in investment by companies, which remained rather sluggish in the fourth quarter of 2019. The restraint of consumer spending due to the slowdown in global economic growth also did not make it possible for growth to become stronger. The only decoration of the report was the decrease in the trade deficit, which was achieved thanks to trade duties and the protectionist policies of the US White House administration.
According to the US Department of Commerce, gross domestic product grew by 2.1% in the fourth quarter of 2019, and expansion was up 2.3% for the whole of 2019. Economists had expected the economy to add the same 2.1% in the fourth quarter as in the third quarter. As I noted above, export growth and a sharp decline in imports were offset by a slowdown in consumer spending and a drop in company investment. Compared with the same period of the previous year, GDP grew by 2.3%, which also coincided with the forecasts of economists.
Data on the US labor market has been ignored, even though the number of Americans applying for unemployment benefits for the first time has declined. According to a report by the US Department of Labor, the number of initial jobless claims for the week from January 19 to January 25 was reduced by 7,000 and reached 216,000. Economists predicted that the number of applications would be at 215,000. The moving average for 4 weeks fell to 214,500.
And if, after the data on US GDP, buyers of risky assets became even more active, the report on the decrease of consumer prices in Germany quickly brought to naught all efforts. Falling prices are pushing Germany further and further away from the European Central Bank's inflation target at just below 2.0%. According to a report by the Federal Bureau of Statistics Destatis, preliminary CPI of Germany fell by 0.6% in January 2020 compared with the previous month, which fully coincided with the forecasts of economists. Harmonized by EU standards, the German CPI index fell immediately by 0.8% with a forecast decline of 0.7%. Compared to the same period of the previous year, the index grew by 1.7%, while the harmonized CPI index added 1.6%.
Inflation data will be released in the eurozone today, where a slight increase is expected, which may support the euro in the short term.
As for the technical picture of the EURUSD pair, the gradual blurring of important levels indicates the absence of major players in the market. On the one hand, there is clearly not enough people who want to take the risk and buy the euro in the current conditions to sell the pair above 1.1030, on the other hand, there isn't anyone who is eager to buy the US dollar after such a downward trend in the absence of new guidelines. The breakdown of support of 1.1005 will again return the market the location of the bears, which will push the trading instrument to the lows of 1.0960 and 1.0910. If the bulls turn out to be stronger, then consolidating above 1.1030 will lead to the updating of the highs of 1.1060 and 1.1090.
GBPUSD
The British pound is preparing for a new wave of growth above the resistance of 1.3105, which was repeatedly tested by large buyers yesterday amid the growth that occurred after the Bank of England kept interest rates unchanged.
The BoE left the key interest rate at 0.75% yesterday. This decision was made with a vote ratio of 7-2. The number of votes cast to keep the key rate unchanged was 7, and the number of votes cast to increase the key rate was 0.
The data on the growth of consumer confidence in the UK in January of this year retained the chance to continue the upward trend. The British are more optimistic in January this year than in December last. The growth of optimism is associated with the resolution of the Brexit issue on the eve of Britain's exit from the EU.
According to Gfk research company, the consumer confidence index rose to -9 points in January 2020. The company notes that the rise in the index was due to Boris Johnson, who received legislative support for his plan for Brexit. But do not forget that there are a lot of difficulties ahead in discussing the trade deal with the EU. The governor of the BoE even mentioned this yesterday during his speech. Mark Carney noted that he expects to conclude a deep free trade agreement with the EU since 2021, but does not build hopes that negotiations will go very smoothly, as a number of requirements need special coordination. Prime Minister Boris Johnson has time until the end of this year, as from January 1, 2021, the UK will no longer be subject to EU trade rules.
As for the technical picture of the GBPUSD pair, it remained unchanged. Yesterday, I paid attention to the daily chart, where, at the level of 1.2290, the lower boundary of the triangle formed on December 23, 2019 passed, the break of which would lead to a very large fall of the pound at the beginning of this year. Now the task of the bulls is to break through the upper boundary of this triangle, which is visible in the area of 1.3133. Consolidation on this range will quickly return the pound to the highs of 1.3265 and 1.3316. We can expect a return to 1.3400 and 1.3520 in the longer term.
The material has been provided by InstaForex Company - www.instaforex.com