16 February 2024, EUR/USD
Event to watch out for today:
15:30 EET USD - PPI m/m
EURUSD:
The EUR/USD pair is falling back after two consecutive days of gains. This can be attributed to market optimism, despite disappointing retail sales data from the US. Nevertheless, the market is showing confidence in the US Dollar (USD) ahead of the release of the Producer Price Index (PPI) data on Friday. During the Asian session on Friday, EUR/USD dropped to 1.0760. Higher US yields are supporting the US Dollar against the Euro (EUR).
According to the FedWatch tool, there is a 53% chance of a 25bp rate cut in May. Weak US retail sales data has put pressure on the US Dollar, but a decrease in initial jobless claims may have provided some support.
In January, US retail sales fell by 0.8% from the previous month, compared to the expected 0.1% decline and the previous 0.4% rise. Although the retail sales benchmark group decreased by 0.4% in January, retreating from the previous 0.6% increase. However, initial jobless claims for the week ending 9th January in the US were 212,000, which is slightly lower than the expected figure of 220,000.
Federal Reserve Bank of Atlanta President Raphael W. Bostic anticipates an improvement in controlling inflation, although it may not be consistent. Bostic acknowledged that if inflation decreases more rapidly, he may reassess his position on the interest rate outlook.
Meanwhile, the most recent Eurozone gross domestic product (GDP) data for the fourth quarter remained unchanged. Nevertheless, the ECB's wage forecast suggests strong wage pressures.
Christine Lagarde, President of the European Central Bank (ECB), stated that recent data indicates ongoing weak economic activity in the short term. Lagarde emphasised the significance of instilling confidence to achieve the ECB's 2% inflation target, while recognising the persistent disinflationary trend.
Trading recommendation: Trade in a narrow range of 1.0740-1.0790
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