Last week, the dollar was pretty surprised and its behavior even caused concern. However, everything is falling into place if you carefully read the text of the minutes of the ECB meeting, which was published on Thursday. The ECB's Board notes steady economic growth in Europe and the stability of key macroeconomic indicators. Based on this, the ECB does not exclude the possibility of reviewing monetary policy in the first half of the year. It is worth recalling that earlier, the ECB extended the quantitative easing program until the end of the third quarter of this year. The change in monetary policy means nothing other than an increase in the refinancing rate. This is what gave strength to the euro, which pulled other currencies.

However, these are all just expectations. While the current indicators also turned out to be quite revealing, the rest are still predictions. In particular, the growth rate of retail sales accelerated from 0.2% to 3.2%, which indicates a high probability of gradual inflation acceleration and this will be a serious reason for raising the refinancing rate. The unemployment rate in Europe continues to decline gradually, reaching 8.7%. At the same time, the growth rate of industrial production slowed from 3.9% to 3.2% but given that these data came out almost simultaneously with the publication of the text of the minutes of the ECB meeting, no one paid any attention to them. The pound was clearly following the euro as there were only data on industrial production in the UK, which showed that their rates slowed from 4.3% to 2.5%.

In turn, the US statistics caused a lot of questions. The number of open vacancies decreased from 5,996 thousand to 5,879 thousand. Commodity stocks in wholesale warehouses increased by 0.8% and the growth rates of producer prices slowed from 3.1% to 2.6%. As a result, inflation slowed from 2.2% to 2.1%. Even growth in retail sales slowed from 6.0% to 5.4%.

This week there is not much data. In particular, inflation is expected to stabilize at around 1.4% in Europe while it is expected to grow from 3.1% to 3.2% in the UK. The continuing increase in inflation in the UK is more likely to confirm fears that the Bank of England has lost control of the situation and this frightens investors the hardest. Only the growth rate of retail sales in the UK can accelerate from 1.6% to 2.1%, which will help the pound slightly. In turn, it is projected to accelerate the growth rate of industrial production from 3.4% to 3.7% in the US.

The dollar is clearly strongly oversold and this week provides a good opportunity for correction.

The EURUSD pair will finish the week at 1.2075.

The GBPUSD pair may fall to 1.3625.