The euro/dollar exchange rate rose at the end of the week, followed by a breakdown of the important resistance level of 1.1351. As part of speculative trading, the pair is overbought and it is logical to expect a decline in trading or a correction.
The yield on 10-year US Treasury bonds rose to 1.793% on Friday.
The news background supported the euro at the beginning of last week. According to Eurostat, it became known that in November 2021 producer prices in the eurozone (PPI index) increased by 1.8% compared to the previous month, when their growth was 5.4%. In annual terms, prices in the month before last increased by 23.7%.
Meanwhile, the yield of 10-year US Treasury bonds approached the value of 1.444% and accelerated growth. There was an increased demand for debt securities after the publication of changes in the number of people employed in the non-agricultural sector from ADP, which came out better than forecast. U.S. unemployment in December fell to 3.9%, the lowest since February 2020, compared with 4.2% in November. This is a strong signal in favor of curtailing the Fed's soft monetary policy.
During the week, the euro continued to grow. According to Eurostat, the volume of industrial production in the eurozone in November 2021 increased by 2.3% compared to October. Experts on average predicted an increase of only 0.2%. Compared to November 2020, industrial production decreased by 1.5%.
At the same time, the dynamics for October was revised for the worse – industrial production decreased by 1.3% compared to the previous month, an increase of 1.1% was previously reported.
As for the United States, in December consumer prices (CPI index) soared by 7% in annual terms, according to data from the Ministry of Labor of the country. This is the maximum rate of recovery since June 1982. Inflation accelerated from 6.8% in November and coincided with analysts' forecasts.
The data on the strengthening of inflation in the US did not support the dollar, as they do not change the market forecasts regarding the monetary policy of the Federal Reserve System (FRS). According to experts, the probability of raising the base interest rate by the Federal Reserve in March is estimated by the market at about 80%.
Important economic statistics will be published this week, and trading activity will traditionally increase in the foreign exchange market. The US dollar will be sensitive to the output of the number of construction permits issued, the volume of construction of new homes, the number of initial applications for unemployment benefits, the index of manufacturing activity from the Philadelphia Federal Reserve and sales in the secondary housing market.