Surprisingly, despite the constant stream of reports about the victorious March of the coronavirus around the world, the currency market behaved strictly in accordance with the macroeconomic data published yesterday. That is, we can say that the market is returning to a certain normality. However, volatility continues to remain somewhat high. The nature of reports regarding the coronavirus indicated that the common European currency should lose ground. Indeed, not only that the number of infected exceeded the mark of 100 thousand in Italy, but also Spain in this indicator came in third place, ahead of China.
The currency market began the week with a strengthening dollar, which looked like a banal rebound at first from the confident movement of the past week. Well, the dollar cannot exclusively lose its position. But quite quickly, the pound began to behave differently from the single European currency, and the data on the lending market in the UK turned out to be the reason for such an initiative. After all, the most important thing is that the number of approved mortgage loans has not decreased from 70.9 thousand to 67.5 thousand, but increased to 73.6 thousand. It is equally important that the volume of mortgage lending in February, as in January amounted to 4.0 billion pounds. It was expected to reach 3.8 billion pounds. And if we take into account the importance of the real estate market for the UK economy and its investment attractiveness, then the optimism of market participants is understandable.
Mortgages Approved (UK):
But the single European currency had something to worry about, as preliminary data on inflation in Spain showed a slowdown from 0.7% to 0.1%. It was predicted that inflation will decline to 0.5%. And a stronger slowdown in inflation was not even offset by the acceleration, from 1.7% to 1.8%, of retail sales growth rates. After all, it was expected that sales should accelerate to 2.3%. In other words, everything is much worse in terms of inflation than expected. And this is in anticipation of the publication of pan-European data. True, in Germany, as expected, inflation fell from 1.7% to 1.4%. But since inflation in the fourth economy of the euro area has declined much more significantly than forecasts, then in the euro area as a whole, it may turn out to be worse than forecast. And separately it is worth paying attention to the fact that this is the data for March.
Inflation (Spain):
Well, American statistics finally put everything in its place. The growth rate of pending home sales transactions accelerated from 5.8% to 9.4% instead of slowing down from 5.7% to 1.5%. That is, not only acceleration was recorded, instead of deceleration, the previous data was also revised upwards. However, we are talking about an indicator that indicates the number of transactions for the sale of housing, which simply have not yet had time to complete. Most often this happens for the simple reason that the parties to the transaction simply wait for registration documents from the registration authorities. This does not affect the actual fact of making a transaction. Just the final stage, namely payment, is transferred to the next month. Therefore, the growth of this indicator suggests that there is a high probability of growth in home sales. As in the primary market, so on the secondary. And of course, which is quite an optimistic factor. Thus, given the way European statistics came out, it's quite clear why the single European currency was declining, and the pound was more likely to stand still.
Unfinished Home Sales (United States):
At the same time, the general mood for further increase of the dollar remains. Even with respect to the pound. Moreover, the final data on GDP for the fourth quarter finally confirmed the fact of a slowdown in economic growth from 1.2% to 1.1%. So it is not surprising that the mood for the pound in the morning is rather negative, because the slowdown in economic growth, especially in the light of current events, clearly indicates that a deep economic recession will be recorded in the first quarter.
GDP growth rate (UK):
The most interesting data today is the data which will be published on the euro area. Of course, we are talking about preliminary data on inflation for March, which should show a decrease from 1.2% to 1.1%. However, recalling yesterday's data on inflation in Spain, it is likely that the data will be even worse. In addition, inflation data is also published in France and Italy. And if in the Fourth Republic they expect a decrease from 1.4% to 0.9%, then in the long-suffering Apennines, a rise in consumer prices by 0.3% should be replaced by their decrease by the same 0.3%. That is, in the third economy, the euro zone is waiting for the return of deflation. Therefore, the probability of the resumption of this fascinating process throughout Europe, is becoming more and more realistic. At the same time, the situation is likely to only worsen, since everything is the same Italy, the decline in producer prices should accelerate from -2.3% to -2.7%. So the growth potential of inflation is becoming somewhat illusive. And in Germany, following the United States, they expect a worsening situation on the labor market, as the unemployment rate should rise from 5.0% to 5.2%. And since the unemployment rate is growing, then consumer spending will be reduced, which means that there is nothing to increase inflation. Well, the data on the balance of payments of Spain for January, which should show a deficit of 1.7 billion euros, will become a cherry on the cake. And this is nothing more than another confirmation of the fact that at the moment we are observing precisely the outflow of capital. Indeed, the previous ten months, the balance of payments of the fourth economy of the euro area was purely surplus.
Inflation (Europe):
In the United States, they are waiting for a new portion of positivity after excellent data on pending home sales. This time in the form of a housing price index from S & P / CaseShiller, which should show an acceleration in the growth rate of these prices from 2.9% to 3.2%. That is, we have sales growth combined with price increases. Well, just the perfect picture. Not a reality, but a dream.
S & P / CaseShiller (United States) Housing Price Index:
The euro/dollar currency pair returned to the level of 1.1000 once again, where it slowed down and formed a variable range of 1.1000 / 1.1050. It is likely to assume that in case the price is fixed lower than 1.0980, the downward interest will resume directing the quote in the direction of 1.0950-1.0900.
The pound/dollar currency pair continues to fluctuate within the level of 1.2350, forming a consolidation of Doji candles below it. It is likely to assume that in case of working out the level of 1.2350 as resistance and fixing the price lower than 1.2300, downward interest may resume towards 1.2250-1.2200.
