EUR/USD Volatility Rises Above 1.1200 Ahead of US Retail Sales

As the anticipated US Retail Sales data for June looms, the EUR/USD pair has experienced a noticeable increase in volatility, crossing the significant 1.1200 threshold. This major currency pair has found a degree of stability as investors from around the globe eagerly await these crucial figures that will undoubtedly influence their financial strategies and future market moves.

During the Asian trading session, S&P500 futures have logged some losses, signaling a cautious sentiment among market participants as we delve into the second-quarter earnings season. Additionally, US equities faced some downturns last Friday, with investors expressing apprehension that corporate earnings might experience fluctuations due to the Federal Reserve’s assertive tightening policies and the strict credit standards established by commercial banks to preserve asset quality.

Simultaneously, the US Dollar Index (DXY) is witnessing a decrease in volatility after forming a base just below the 100.00 level. It is projected that the DXY will exhibit significant movement following the announcement of the US Retail Sales data. The market consensus suggests an increased growth in monthly retail demand at a faster rate of 0.5%, a notable increase from the previous 0.3%. Excluding automobiles, retail demand is expected to see an upturn of 0.3%, a slight rise from the last recorded figure of 0.1%.

Meanwhile, across the Atlantic Ocean, the Euro has seen considerable strengthening, bolstered by predictions that the European Central Bank (ECB) will bring its cycle of interest-rate hikes to a close after July as inflation rates in the Eurozone persistently escalate. Currently, the continent’s headline inflation stands at a substantial 5.5%, while core inflation—which excludes the variable oil and food prices—sits at 5.4%, considerably above the target rate of 2%.

In contrast, economists at Nordea suggest that the European Central Bank still sees the need for further tightening. They forecast another rate hike in July, deeming it nearly certain, but they also predict that this will be the concluding hike in the current cycle.

In conclusion, the heightened volatility of the EUR/USD pair, surpassing the 1.1200 level, mirrors the market’s anticipation of the US Retail Sales data. Both the Euro and the US dollar are under close scrutiny, influenced by the monetary policies of their respective central banks and the economic conditions within their regions. Consequently, investors worldwide are closely observing these developments to make informed decisions in this dynamic and ever-evolving market landscape.