EUR/USD Steadies Above 1.1000 Ahead of US Retail Sales Data

The EUR/USD pair is holding steady near 1.1010, consolidating its gains after pulling back from a recent seven-month high during the Asian session on Thursday. The Euro (EUR) strengthened against the US Dollar (USD) after the Eurozone’s second-quarter (Q2) Gross Domestic Product (GDP) growth met expectations.

Data released by Eurostat on Wednesday showed the Eurozone economy grew by 0.3% quarter-on-quarter (QoQ) in Q2, compared to the first quarter of the year. On an annual basis, the economy expanded by 0.6%, aligning with market expectations and potentially providing short-term support for the Euro.

Despite this positive GDP data, the growth outlook remains cautious. ING economist Bert Colijn noted that recent figures raise concerns about the strength of the service sector, leading to lowered GDP growth expectations for the remainder of the year. The European Central Bank (ECB) is anticipated to lower rates again in September, given the fragile economic outlook, after keeping key interest rates unchanged at its July meeting.

In the US, signs of cooling inflation are putting pressure on the USD, creating a favorable environment for the EUR/USD pair. The US headline Consumer Price Index (CPI) inflation dropped to 2.9% year-on-year (YoY) in July, down from 3% in June. This figure was slightly below expectations, as reported by the Labor Department on Wednesday. Core CPI, which excludes food and energy, rose 3.2% YoY, in line with market forecasts but slightly lower than the 3.3% increase seen in July.

Traders are now focused on the upcoming release of US economic data on Thursday, which includes Retail Sales, weekly Initial Jobless Claims, the Philly Fed Manufacturing Index, and Industrial Production. Stronger-than-expected results from these reports could support the USD and limit further gains for the EUR/USD pair.