Political risks of Italy are pressured by the euro
A strong report on consumer sentiment in the United States, as well as on industrial production growth, very quickly eclipsed the weak data on retail sales, keeping the ascending potential of the US dollar against a number of world currencies, especially against the euro.
Political risks of Italy
Pressure on risky assets could be provided by conversations related to Italy and its policies, which are carried out by the new authorities. According to a number of leading economic agencies, the risks associated with the Italian policy are taken into account only in the government bonds of Italy, however, they have not affected the quotations of the euro.
Any changes in the rate of the new government, especially concerning the public debt, can seriously affect the quotes of the European currency, which will lead to a sharp drop against the US dollar, and trade conflicts that are flaring up with renewed force will continue to support the US currency.
Data on the US economy
As I noted above, data on weak growth in retail sales in the US did not put pressure on the dollar.
According to the report of the US Department of Labor, retail sales in August 2018 grew by only 0.1% compared to the previous month and amounted to $ 509 billion. A number of economists expected a larger increase in sales by 0.4%. Compared to the same period last year, retail sales in the US in August rose by 6.6%. The report also indicates that the July data were revised upward to 0.7%.
Prices for imported goods in the US declined in August. According to the report of the Ministry of Labor, import prices in August 2018 dropped by 0.6% compared to the previous month. Economists had expected that import prices in August would fall by 0.3%. As indicated in the report, the main pressure on import prices was made by the decrease in the cost of oil. The price of imported oil fell immediately by 3.9% compared to the previous month.
Good support for the US dollar in the second half of the day was provided by data on the growth of industrial production, which indicates a healthy economy. The increase in production was due to the growth of the utilities and automotive sector.
As indicated in the report of the Federal Reserve System, industrial production in August 2018 increased by 0.4%, while economists forecast growth of 0.3%.
Inventories of companies in the US in July rose by 0.6% compared to the previous month and amounted to 1.95 trillion US dollars. Such data was provided by the US Department of Commerce on Friday. Economists had expected that stocks in July rose by 0.5% compared to the previous month.
As I noted above, let it be preliminary, but the growth of US consumer sentiment will positively affect the pace of economic growth.
According to the data, the indicator of consumer sentiment rose to the level of 2004. So, according to the University of Michigan, the preliminary index of consumer sentiment in September 2018 rose to 100.8 points from the August value of 96.2 points. Economists had expected that the preliminary figure for September would be 96.1 points.
Particularly positive on the index were the expectations of further economic growth, which will lead to the creation of a new number of jobs and a reduction in the level of unemployment.
The speech of the FRS representative Charles Evans was also positive. In his opinion, the US economy is growing at full speed, which speaks in favor of a gradual increase in rates.
Evans expects GDP growth of 3% this year and about 2%, while unemployment should decline to only 3.5% by 2020. A representative of the Fed predicts that inflation will exceed 2% in the near future.
Technical picture EUR / USD
As for the technical picture of the EUR / USD currency pair, then there is all the hope for the level of support 1.1615, the breakthrough of which will lead to a new major downward wave and completely erase the upward impulse on the euro with a decline to the levels of 1.1570 and 1.1520.