EUR/USD exchange rate rangebound amid upbeat market mood
The euro US dollar (EUR/USD) exchange rate is trading mostly flat this morning as markets await the latest retail sales data from the US.
At the time of writing, the EUR/USD exchange rate is trading at around €1.1012, virtually unchanged from this morning’s opening rate.
US dollar (USD) wavers ahead of domestic retail sales
The US dollar (USD) is struggling to garner investor attention this morning as markets remain reluctant to place any aggressive bets ahead of this afternoon’s upcoming retail sales data.
Further weighing on the ‘greenback’ this morning are yesterday’s cooler-than-expected inflation figures.
As the latest CPI data has ramped up bets for a more aggressive tightening cycle from the Federal Reserve this year, USD exchange rates are struggling to catch bids.
Preston CaldwellChief US Economist at Morningstar explained:
‘Optimal monetary policy calls for a hefty reduction in the federal-funds rate in short order. The Fed’s rhetoric is steadily shifting in this direction as well. Our base case for the upcoming September 2024 meeting is still for just a 0.25% cut, rather than the 0.5% point cut that many market participants are now expecting.’
Will an expected 0.3% rebound in the US’s retail sales lift the ‘greenback’ this afternoon? Or will another below forecast publication undermine the US dollar further?
Euro (EUR) wobbles amid increase in risk appetite
The euro (EUR) is on the back foot against the majority of its peers this morning as a lack of economic data releases sees the common currency struggle to find a clear direction.
However, despite the lull in data, the single currency is being undermined by this morning’s bout of cheery trade.
As a safe-haven currency, the euro is faltering against its riskier rivals as markets remain upbeat and opt for riskier assets.
EUR/USD forecast: US sentiment index to drive movement?
Looking ahead, the primary catalyst of movement for the euro US dollar exchange rate will likely be the publication of the preliminary Michigan consumer sentiment index for August.
Scheduled for release tomorrow, the index is forecast to marginally rise from a previous reading of 66.4 up to an expected reading of 66.9.
Although the index is forecast to increase, it is also expected to remain near July’s eight month low, which could undermine the ‘greenback’ at the end of the week.
Turning to the euro, data will remain few and far between moving into the latter stages of the week, and as such this will likely see the common currency continue to be driven by market mood.
Should this morning’s upbeat trade continue, EUR exchange rates will likely close the week on the back foot.
