Skip to Content
News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View More
EUR/USD Rate Eyes August High Ahead of US Retail Sales Report

EUR/USD Rate Eyes August High Ahead of US Retail Sales Report

David Song, Strategist

Euro Rate Talking Points

EUR/USD clears the September high (1.0198) following the larger-than-expected slowdown in the US Consumer Price Index (CPI), with the exchange rate on track to test the August high (1.0369) ahead of the US Retail Sales report amid growing speculation for a smaller Federal Reserve rate hike in December.

EUR Forecast
EUR Forecast
Recommended by David Song
Get Your Free EUR Forecast
Get My Guide

Fundamental Forecast for Euro: Neutral

EUR/USD rallies to a fresh monthly high (1.0326) as the Greenback weakens against all of its major counterparts, and the exchange rate may continue to appreciate over the coming days as signs of easing inflation fuels bets for a shift in the Fed’s hiking-cycle.

image2.png

Source: CME

According to the CME FedWatch Tool, market participants are pricing a greater than 80% chance for a 50bp rate hike on December 14, and it remains to be seen if the Federal Open Market Committee (FOMC) will adjust its approach in combating inflation as the central bank pledges to “take into account the cumulative tightening of monetary policy and the lags with which monetary policy affects economic activity and inflation.”

Until then, the Euro may continue to appreciate against its US counterpart as the FOMC braces for “a sustained period of below-trend growth and some softening of labor market conditions,” but the US Retail Sales report may prop up the Greenback as the update is anticipated to show a pickup in household consumption.

image3.png

Retail spending is expected to increase 0.9% in October after holding flat during the previous month, and a positive development may push the FOMC to deliver another 75bp rate hike at its last meeting for 2022 as Chairman Jerome Powell acknowledges that “incoming data since our last meeting suggest that the ultimate level of interest rates will be higher than previously expected.”

With that said, speculation for a smaller Fed rate hike in December may keep EUR/USD afloat over the coming days, but an upbeat US Retail Sales report may curb the weakness in the Greenback as it raises the FOMC’s scope to pursue a highly restrictive policy.

How to Use IG Client Sentiment in Your Trading
How to Use IG Client Sentiment in Your Trading
Recommended by David Song
Improve your trading with IG Client Sentiment Data
Get My Guide

--- Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES