In fact, market participants have ignored today’s economic data from Europe. In our video review on InstaForex TV channel, we will take a look at the main drivers of the market mood.
The UK GDP data for the first quarter showed a rapid change from economic growth into economic slump. However, the pound sterling did not react to the report. According to preliminary data, the UK GDP dropped by 1.6% whereas economists had expected a decline of 2.0%. Notably, the UK was almost the last country that introduced restrictive measures to contain the coronavirus spread. The UK lockdown was imposed at the end of March that is the end of the first quarter. Nevertheless, the economic slump is rather significant. Thus, it is obvious that in the second quarter, the UK GDP will fall even deeper.
Today, the UK has also disclosed its industrial production report. Thus, the indicator decreased by 8.2% compared to a slide of 3.4% in the previous period. However, the report has been also ignored.
Yesterday, the pound/dollar pair showed a confident downward trend. The pair broke 1.2265 that is the low logged on May,7th. After that, the quote dropped to the level of 1.2250.
It is quite possible that buyers’ activity will be restrained at the level of 1.2250. There, the price may rebound to the level of 1.2350. However, the downward movement will still prevail. Thus, traders should carefully analyze levels below 1.2250 in order to enter the market.
Short positions can be opened below 1.2240 with the targeted level at 1.2150-1.2160.
Long positions can be opened above 1.2310 with the target at 1.2350.
Today, the eurozone has also reported on its industrial production. However, the euro showed no reaction to the data. In March, the eurozone industrial production tumbled by 12.9% compared to a fall of 2.2% in the previous period. The indicator has been declining for 17 months in a row. Analysts suppose that in the next months, including April, the eurozone industrial production will go on sliding.

The euro/dollar pair managed to rebound to the level of 1.0775. Once again traders focused on the level of 1.0850 as it was earlier.
It is quite possible that the pair will hover near the mentioned level for a short period of time. Investors are likely to buy the asset at the levels of 1.0830/1.0860 thus boosting market activity.
Buy deals can be opened above 1.0865 with the target at 1.0885-1.0900.
Sell positions can be initiated below 1.0830 with the target at 1.0790.
Photo – news about coronavirus
So, what is the main driver of the market? In fact, the market mood is shaped by concerns about the US deflation. Yesterday, the US inflation data showed that consumer prices were confidently falling. Today, the US is expected to reveal its producer price data. If the indicator decreases by 0.3% on a yearly basis, it will be a sign of deflation.
At the same time, there are rumors that the US Fed may take the key interest rate into negative territory. The consumer price data is the main reason for such a decision. Unprecedented unemployment growth together with deflation may result in an extremely long crisis that will last several years. That is why, the US producer price figures may help the regulator make the right decision. Thus, today, the US dollar may also lose ground amid the US statistics. Moreover, the chairman of the Federal Reserve Jerome Powell is expected to hint at the negative rates in today’s speech.

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