EUR/USD Overview
- EUR/USD sees a 0.47% increase to 1.1702, bolstered by positive US retail sales from July and June.
- Market focus shifts to the Trump-Putin summit in Anchorage, where analysts express doubt about achieving a ceasefire in Ukraine.
- UBS projects a rise of EUR/USD to 1.21 by year-end if a ceasefire occurs.
- US consumer sentiment declines in August due to inflation concerns, despite strong spending data.
EUR/USD changed direction on Friday, climbing in response to solid US retail sales data, although market players are still factoring in the Federal Reserve’s upcoming decisions in September. The currency pair is currently up 0.47% at 1.1702.
Attention has shifted to Anchorage, Alaska, due to the summit between US President Donald Trump and Russian President Vladimir Putin. However, analysts are not very optimistic about the prospects for a ceasefire in Ukraine. Trump mentioned uncertainty about what would constitute a successful meeting and emphasized the importance of reaching a ceasefire before addressing other topics.
Some analysts, including those from UBS, suggest that this could be positive for the euro by the year’s end.
Separately, while US retail sales in July saw a 0.5% increase, the previously reported figure for June was revised upward, showing consumer resilience. However, the University of Michigan’s Consumer Sentiment Survey revealed a decline in confidence among American households in August, partly due to concerns about rising inflation.
Looking at Europe, next week’s EU economic events will include the Flash PMI report, which may provide more insight into recovery in the manufacturing sector. Inflation data from the EU and Germany could bolster arguments for the European Central Bank (ECB) to pause its easing cycle and support the euro.
Market Insights: EUR/USD Reacts to Data
- The euro’s rise is largely attributed to a broader weakening of the US dollar, which is expected to close the week down 0.43%. The US dollar index has dipped to 97.84.
- US retail sales rose by 0.5% in July, aligning with expectations but slowing from a 0.9% increase revised up in June. On an annual basis, the growth rate decreased from 4.4% in June to 3.9%.
- Industrial production fell by 0.1% in July, after a 0.4% increase in June, which was below expectations for no change.
- The University of Michigan reported a drop in consumer sentiment, with the index falling to 58.6 in August from 61.7 in July, missing the forecast of 62.0. Concerns about inflation are steering this shift, with one-year inflation expectations rising from 4.5% to 4.9% and five-year expectations increasing from 3.4% to 3.9%.
- In light of recent US data, the Atlanta Fed has kept its GDPNOW Q3 forecast unchanged at 2.5%.
- Traders are pricing in a 95% chance of a 25 basis point rate cut at the Fed’s September meeting, as per Prime Market terminal data.
- Regarding the ECB, it appears likely to halt its easing cycle in September, with a 94% chance of doing so, and only a 9% chance of a 25 basis point cut.
Technical Analysis: EUR/USD Trends
The EUR/USD is on an upward trajectory, and Friday’s gains could signal a continuation if daily closures exceed 1.1700. Current momentum, as measured by the Relative Strength Index (RSI), suggests potential for further increases, allowing bulls to aim for yearly highs around 1.1800 and 1.1829, needing to surpass the highest value of 1.1788 achieved on July 24th.
On the flip side, if the pair closes below 1.1700, it may retest the 20-day Simple Moving Average (SMA) around 1.1624/30, with further losses expected below 1.1600.
