In the foreign exchange market last week, investors were buying the U.S. dollar and the global reserve currency rose moderately from its 50-day moving average.
U.S. economic data was mixed again. Retail sales rose 5.4% year-on-year and exceeded market participants expectations. Consumers increased spending on cars, clothing, and household items in September.
Meanwhile, industrial production remains -7.3% below last year's level, suggesting that economic activity is still lower than before the pandemic. Inflation in the country was 1.4% in September and 1.7% after eliminating energy and food prices. The number of new jobless claims rose from 0.84 to 0.90 million a week.
Coronavirus data show further growth globally:
- The number of cases in the U.S. grew from 48 to 54 thousand per day, based on a 7-day average
- In India, the spread of the virus continued to slow and the weekly average fell from 72 to 65 thousand
- In Brazil, the average number of new cases dropped from 26 to 20 thousand per day
- In Russia, growth has somewhat stabilized at 14 thousand a day in recent days
Europe, the situation continues to deteriorate, a state of emergency has been declared in France and quarantine conditions are being tightened.
The major currency pair EUR/USD has depreciated, reflecting trends in the U.S. dollar. Economic indicators in Europe were mixed: survey indicators were strong and actual data showed a slower recovery.
The ZEW economic sentiment index was 52.3 points and did not meet investor expectations and instead fell from last month's level. Industry volumes were -7.2% lower than a year ago, suggesting a structural decline in global demand.
The EUR/USD pair ended the week down -1.0%.
The top Asian pair, the USD/JPY, depreciated and remained below the 50-day moving average. There has been little economic data. The main focus was on the change in industrial output in August, which was -13.8% lower than at the same time a year ago.
USD/JPY ended the week trading down -0.2%.
The British pound also depreciated against the U.S. dollar. Politicians in the country have started to indicate that they may start preparing to withdraw from the European Union without a trade treaty, as negotiations on Europe's side do not reflect Britain's expectations.
Among the economic news was labour market data:
- The number of unemployed rose by 153 thousand and wages did not rise
- The unemployment rate is 4.5% and has risen quite significantly from the pre-pandemic low of 3.8%
GBP/USD ended the week trading down -1.0%.
This week will start with Japanese export data and China's third-quarter economic results. China will also publish data on industrial production, retail trade and investment, which will allow market participants to better understand the country's economic situation.
No important data is planned for Tuesday, and inflation rates in the U.K. are expected on Wednesday. On Thursday, U.K. retail sales data and the results of the U.S. secondary real estate market activity. Friday will begin with Japan's inflation rates in September and the preliminary results of the Industrial PMI index in major economies.
According to Admiral Markets market sentiment data:
- 57% of investors have long positions in the EUR/USD pair (increased +39 percentage points from last week)
- In the main Asian pair USD/JPY, 64% of investors have long positions (increased +11 percentage points)
- In the GBP/USD pair, 51% of participants expect a rise (up 14 percentage points)
Such market data is interpreted as contraindicative, so EUR/USD and USD/JPY pairs are expected to fall and the GBP/USD pair outlook is neutral. The analysis of positioning data needs to be combined with fundamental projections and technical analysis.
Sources: bloomberg.com, reuters.com, Admiral Markets MT4 Supreme Edition, investing.com
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