- US sales rose just 0.1% in May compared with expectations for a 0.3% gain.
- Markets are pricing in a 67% chance of a Fed tapering in September.
- Economists expect the ECB to cut rates twice more this year.
EUR/USD price analysis shows slow recovery as dollar remains fragile after weaker-than-expected retail sales data. Meanwhile, the euro remained vulnerable amid political uncertainty and policy differences between the ECB and the Fed.
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The dollar fell on Tuesday after US retail sales data showed weaker-than-expected spending in May. Sales rose just 0.1% in May compared with expectations for a 0.3% increase. Furthermore, the previous month’s data was revised from a reading of 0.0% to -0.2%, indicating a slowing economy.
Markets are pricing in a 67% chance the Fed will cut borrowing costs in September. Furthermore, they expect at least 50 basis points of rate cuts from the Fed this year.
However, policymakers took a different view, predicting just one cut in December. This hawkish outlook has helped the dollar stay strong despite poor economic data. Moreover, it increased the chances of a policy deviation with the European Central Bank.
According to a Reuters poll, economists expect the ECB to cut rates twice more this year, in September and December. However, they also warn that there is a greater risk of minor cuts. Policymakers have become more cautious, with Philip Lane noting there is no urgency to cut rates if the economy remains robust. Meanwhile, Lagarde said the central bank will depend on economic data for future policy decisions.
At the same time, investors continued to worry about the situation in France after the announcement of early elections.
EUR/USD key events today
Investors do not expect any key developments from the US or the Eurozone today. Accordingly, the price could consolidate.
EUR/USD Price Technical Analysis: Breakout stalls as bulls challenge 30-SMA
On the technical side, the EUR/USD price rose above the 1.0725 level to retest the 30-SMA resistance. Despite this bullish move, the bias remains bearish as price makes lower highs and lows. Moreover, it is trading in a bearish channel and is currently located closer to the channel resistance.
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Therefore, there is a chance that the bullish movement will continue past the SMA to retest channel resistance before bouncing lower. A continuation of the downtrend will allow the bears to retest the 1.0650 level.
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