- EUR/USD weakens as strong US data lift expectations that the Fed will hold rates.
- US Retail Sales rose 0.6% to $735.9 billion in November, beating expectations after October’s 0.1% decline.
- The Euro stays subdued despite cautious ECB remarks on policy outlook.
EUR/USD extends its losses for the third consecutive session, trading around 1.1640 during the Asian hours on Thursday. The pair loses ground as the US Dollar (USD) advances as a stronger-than-expected United States (US) Producer Price Index (PPI) and Retail Sales, along with last week’s easing Unemployment Rate, reinforced the case for the US Federal Reserve (Fed) to keep interest rates on hold for the coming months. Traders will likely monitor the weekly US Initial Jobless Claims report later in the day.
The US Census Bureau reported on Wednesday that Retail Sales rose more than expected to $735.9 billion in November, up 0.6%, following a 0.1% contraction in October and beating market expectations of a 0.4% increase. Meanwhile, the Producer Price Index (PPI) came in hot in November, with both headline and core measures reaching 3% year-over-year (YoY). In response, Morgan Stanley analysts delayed their expectations for rate cuts to June and September from January and April following Friday’s jobs report.
Minneapolis Fed President Neel Kashkari said at the Midwest Economic Forecast Forum hosted online by the Wisconsin Bankers Association on Wednesday that the overall economy seems quite resilient and that he has seen less tariff pass-through than expected. Kashkari added that inflation is still too high but is moving in the right direction.
The EUR/USD pair weakens as the Euro (EUR) remains subdued despite cautious remarks from European Central Bank (ECB) officials, indicating that the central bank is in a rush to raise interest rates.
European Central Bank Vice President Luis de Guindos said on Wednesday that current market pricing does not fully reflect the high level of global uncertainty, adding that geopolitical risks significantly increase downside risks to growth.
Mārtiņš Kazāks, Governor of the Bank of Latvia and ECB Governing Council member, said risks to the outlook remain balanced, warning that uncertainty is still elevated, including the potential for non-linear shocks. He added that the ECB is delivering on its inflation mandate and remains in a solid position.
