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EUR/USD Rises Amid Key Economic Updates: Eurozone Retail Sales in Focus

As the market gears up for a crucial week, the EUR/USD pair shows resilience, bouncing from recent lows and attracting investor attention in early trading.

Key Points:

  • 📊 EUR/USD Recovery: Despite a strong USD rebound, the pair holds steady near 1.0948.
  • 📉 US Labor Market Strength: US Nonfarm Payrolls exceed expectations, casting doubts on early Fed rate cuts.
  • 🛒 Eurozone Retail Watch: Investors await Eurozone Retail Sales data, following disappointing German figures.

In the early Asian session on Monday, the EUR/USD currency pair garnered buyer interest, marking a notable recovery from multi-week lows. Trading around 1.0948, the pair is up by 0.09% for the day, demonstrating resilience amidst a broader USD rebound.

Investors’ attention is partly anchored on the Federal Reserve’s (Fed) next moves, especially given the recent moderation in inflation. However, expectations for aggressive rate cuts remain tempered. Key US inflation data due on Thursday will be closely watched, with the headline Consumer Price Index (CPI) expected to register a 3.2% year-over-year increase, while Core CPI is forecasted to decelerate to 3.8% YoY.

Friday’s US labor market data introduced fresh perspectives into market predictions regarding the Fed’s interest rate trajectory. The Labor Department’s report showed a significant jump in US Nonfarm Payrolls (NFP), with 216,000 new jobs added in December, surpassing the anticipated figure of 170,000. This increase, up from 173,000 in November, has cast doubts on the likelihood of Fed rate cuts commencing in March.

The focus now shifts to the Eurozone, with investors eagerly awaiting Retail Sales data for November. Projections indicate a potential 0.3% month-over-month decrease, and a year-over-year drop to -1.5%, exacerbating October’s -1.2% decline. This anticipation is further clouded by last week’s disappointing German Retail Sales figures, which fell to 2.4% YoY, against expectations of a -0.1% drop. The monthly German data also showed a significant contraction of -2.5% MoM.

Moreover, the Eurozone Harmonized Index of Consumer Prices for December revealed a 2.9% YoY increase, with the core figure rising 3.4% YoY, both trailing behind estimations. These figures, combined with the upcoming German Trade Balance and Eurozone Retail Sales data, are crucial for setting the tone for the EUR/USD pair’s direction.

As the week unfolds, market participants will also keep an eye on the US CPI data scheduled for Thursday, and the US Producer Price Index (PPI) for December, due on Friday. These releases are expected to provide clearer insights into the pair’s trajectory, amid a landscape of fluctuating economic indicators and policy expectations.