Yesterday was an extremely busy day, but what's extremely more important is that the activity on the market has clearly grown. The activity in the morning was associated exclusively with COVID-19, in particular with reports of successful British vaccine trials. This good news immediately became the reason why Mr. Boris Johnson put an end to the nationwide quarantine. Starting next week, many of the restrictive measures in the UK will be abolished, but regional restrictions may still be tightened. In general, this clearly led to the euro's growth. In turn, the US dollar not only recovered all its losses, but even tried to strengthen almost immediately after the opening of the US session. The reason for this was macroeconomic statistics and not the ending US presidential election. After all, Mr. Trump announced the beginning of the transfer of power to Mr. Biden a few hours after all these movements in the currency market happened.
However, the sharp rise in the US dollar coincides with the publication of American statistics. Thus, the gradual reduction in political uncertainty is unlikely to have affected market mood. Sooner or later, this whole political issue has to end. The only question was who would be declared the winner – the media has long ago announced Biden's victory, and everything is moving towards this. Meanwhile, Donald Trump still intends to continue to fight. However, he is unlikely to succeed, since the states certify the voting results, fixing precisely the victory of Joe Biden. It will probably be impossible to challenge these results in court.
At the same time, it is quite obvious that the euro has simply ignored the preliminary data on business activity indices, which turned out to be much worse than forecasts. Only the manufacturing index matched the forecasts and declined from 54.8 to 53.6. The index of business activity in the service sector fell from 46.9 to 41.3 instead of 43.7. As a result, the composite PMI fell from 50.0 to 45.1, although it was expected to decline only to 46.1. Nevertheless, the single European currency stood still at that time and began to grow following the pound only after a while.
Composite PMI (Europe):
It was noted above that the pound began to rise amid reports of a successful trial of the British vaccine. On another note, preliminary business activity indices were also pleasing, as they turned out to be slightly better than forecasts. Here, the manufacturing index rose from 53.7 to 55.2, rather than declining to 50.0. At the same time, the index of business activity declined from 51.4 to 45.8, instead of 42.0. Lastly, the composite index, which was forecasted to decline to 42.2, only declined from 52.1 to 47.4.
Composite PMI (UK):
During the opening of the US session, the most interesting thing happened. And yes, of course, This can be explained by the fact that the political tension is nearing its end. However, it was mentioned above that the timing of all this perfectly coincides with the publication of preliminary data on business activity indices. Contrary to Europe's statistics, the indices in the US did not decline, but rose.
So, the manufacturing index rose from 53.4 to 56.7, with a forecasted decline to 52.9. The index of business activity in the service sector, in turn, rose to 57.7 instead of declining to 55.1. Generally, the composite PMI increased from 56.3 to 57.9, with an expected decline to 54.5. It can be observed that the data were very positive, which led to the dollar's growth. At the same time, the decrease in political uncertainty has only accelerated the process of returning the market to normality, when investors make decisions based on macroeconomic statistics. However, this will cause stagnation today, due to the lack of macroeconomic data.
Composite PMI (United States):
The EUR/USD pair found resistance around the level of 1.1900 again, where there was a stop. As a result, the price reversed in the direction of 1.1800. We can assume that the recovery process yesterday will be replaced by a variable gap, where the range of 1.1830/1.1860 can be used as time limits.
In turn, the GBP/USD pair reached the resistance level of 1.3400, where a stop occurred, followed by a price rebound towards the 1.3300 level. We can assume that the quote will go into a stagnation stage between the range of of 1.3300/1.3350, if there will be no new upturn above 1.3350.
