Euro showed mixed dynamics on Friday morning, after dropping sharply on Thursday amid the Fed's announcement that rates may hike much earlier than scheduled. The central bank said interest rates could increase to 0.6% in 2023, which triggered talks of when the Federal Reserve will begin cutting monthly bond purchases.

The market was highly driven yesterday by the policy decisions that even weak reports on the US labor market could not break the downward trend. Strong data from the Eurozone also failed to push euro up, even though it exceeded the ECB's target for the first time in more than two years. Perhaps, the markets did not react because the figure fully coincided with the forecasts.

According to Eurostat, CPI rose to 2.0% in May, from 1.6% in April. Growth was mainly due to the 13.1% rise in energy prices. Meanwhile, prices of food, alcohol and tobacco increased by 0.5%, while the cost of services rose 1.1%. Compared to the previous month, CPI climbed by 0.3%, which is in line with preliminary estimates.

With regards to construction, a 2.2% decrease was observed in the April index.

Going back to the US, jobless claims were reported to have increased last week, from 376,000 to 412,000. Analysts expected the figure to decrease to 359,000.

Manufacturing activity also slowed, amounting to only 30.7 points in June, from 31.5 points in May. The decline was caused by the noticeable slowdown in the growth rate of new orders, which fell to 22.2 points.

As noted earlier, euro was under strong pressure on Thursday, so it remained stuck under 1.1925. Accordingly, a break above this level will lead to a jump to 1.1960, or towards the 20th figure. But if euro further declines to 1.1880, the quote will plunge to 1.1830, or to the 18th figure.

GBP

Pound fell on the news that UK retail sales unexpectedly dropped in May. The Office for National Statistics said it fell by 1.4%, contrary to the forecasts of economists, who had expected an increase of 1.5%. Apparently, grocery sales slipped by a record 5.7%, while home and garden stores saw an increase. Online sales also declined because physical stores have reopened. But retail sales are expected to show strong growth when the economy fully reopens in late June.

Although the data put pressure on pound, the decline will be short-lived because the UK economy will continue to recover because of growing consumer spending.

So today, a lot will depend on 1.3940 because a break above it will result in a larger jump towards 1.4000 and 1.4050. But if pound drops to 1.3840, the quote will plunge to the 38th figure, and then to 1.3755.