Despite the good data on the US inflation growth and expectations of the Federal Reserve raising the interest rates, investors are in no hurry to buy the US dollar, as the increase in the budget deficit in 2018 becomes the number one problem.

The growth of the US budget deficit, together with the growing deficit of foreign trade in the US in 2018, could seriously affect the prospects for US dollar strengthening, even though there are expectations for several higher interest rates this year. Also, the new tax reform from Donald Trump only aggravates this situation.

According to Ministry of Labor data issued yesterday, the consumer price index in January rose by 0.5% compared to the previous month after an increase of 0.2% in December. The base index CPI rose by 0.3% after a 0.2% increase in December. Economists had expected the growth of the CPI index by 0.4% compared to the previous month and the growth of the base CPI by 0.2%.

The pressure on the US dollar was due to data on the reduction of consumer spending in retail trade, which could negatively affect further prospects of economic growth in early 2018.

According to the report of the US Department of Commerce, retail sales in January this year fell by 0.3% compared to the previous month. Economists had expected sales to grow by 0.2% compared to the previous month. In comparison with the same period of the previous year, sales in January grew by 3.6% in January.

According to the Ministry of Commerce, inventories of US companies in December increased by 0.4% and amounted to 1.902 trillion US dollars. Economists had expected a 0.3% increase in inventories in December. In manufacturing, inventories in December rose 0.5% compared to the previous month, while inventories in retail trade increased by 0.2%.

As for the technical picture of the EUR/USD currency pair, the market remains on the side of buyers of risky assets.

A break above 1.2470 will further increase long positions in the euro and update the monthly highs around 1.2520 and 1.2560. In the case of a decline in the euro, consider long positions can be after updating 1.2420, or slightly lower, in the region of a larger support level 1.2390.

Despite the fact that the commercial reserves of crude oil and gasoline in the US for the reporting week increased, oil quotes managed to restore their positions against the background of the major weakening of the US dollar.

According to the report of the Energy Information Administration of the US Department of Energy, during the week from 3 to 9 February, oil reserves increased by 1.8 million barrels to 422.1 million barrels, while economists had expected 2.6 million barrels of reserves.

Gasoline stocks increased by 3.6 million barrels to 249.1 million barrels, while analysts had expected growth of 1.4 million barrels. Distillate stocks fell by 459,000 barrels to 141.4 million barrels. A load of oil refining capacities decreased by 2.7 percentage points to 89.8%.

* The presented market analysis is informative and does not constitute a guide to the transaction.