Title: EUR/USD Strengthens After Mixed US Economic Data; Attention Turns to Trump-Putin Meeting
Original Author: FXStreet News Report
The euro gained ground against the US dollar on Wednesday, following the release of mixed US economic indicators that created uncertainty about the Federal Reserve’s next policy moves. The EUR/USD pair rose in the wake of data that suggested slower economic growth, which weakened the dollar and encouraged a more bullish outlook on the single European currency. Meanwhile, markets turned their attention to an upcoming meeting between US President Donald Trump and Russian President Vladimir Putin, as traders factored in geopolitical risks that could influence monetary policy and market sentiment in the coming weeks.
Currency traders have been closely monitoring the EUR/USD exchange rate after recent fluctuations caused by trade tensions, central bank expectations, and divergent economic data from both the eurozone and the United States. Wednesday’s market activity demonstrated how key data releases and geopolitical events can influence short-term monetary flows, especially in such a heavily traded pair.
Mixed US Economic Data Pressures the Dollar
Several key data points from the United States were released on the same day, offering a somewhat conflicting picture of the country’s economic health. These indicators prompted a re-evaluation of the Federal Reserve’s outlook, directly impacting the US dollar’s performance against its major counterparts.
The most important releases included:
– Retail Sales: US retail sales data for the previous month came in below expectations. Retail sales rose only 0.1 percent month-over-month, compared to a forecast of 0.3 percent. The figure raised concerns about domestic consumer spending, a major contributor to US GDP growth.
– Retail Sales Excluding Autos: When excluding autos, sales remained unchanged at 0.0 percent. Analysts had anticipated growth of 0.4 percent, which led to additional disappointment about consumer resilience.
– Core Retail Sales: Core retail sales, which exclude automobiles, gasoline, building materials, and food services, came in flat. This report is closely watched because it directly affects the GDP calculations.
– Import Prices: Import prices declined by 0.1 percent compared to an expected increase of 0.1 percent. The miss was largely attributed to weakening oil prices and slower global demand for US products.
– Business Inventories: Business inventories increased by 0.1 percent month-over-month, slightly below market projections of 0.2 percent. While this figure is generally less volatile, it contributes to GDP calculations.
The collective impact of these releases pressured the dollar by reinforcing the view that the US economy might be entering a softer growth phase. Many investors interpreted the weaker-than-expected numbers as a potential signal that the Federal Reserve might proceed cautiously with future interest rate hikes. Lower or delayed rate increases typically apply downward pressure on the dollar, making it less attractive to yield-seeking investors.
Euro Gains on Dollar Weakness and Improved Sentiment
In contrast to the US data, the European Central Bank (ECB) signaled stability in the eurozone by maintaining its current guidance on interest rates and monetary stimulus. While concerns remain about sluggish inflation and slow economic growth in parts of the euro area, the ECB’s relative calm has helped underpin the euro’s resilience.
Key factors supporting the euro on the day included:
– Reduced Political Risk: Confidence returned to European markets after political tensions in Italy and Germany appeared to stabilize. Parliamentary risks, especially regarding European integration and budget issues in Italy, have been a drag on the euro in previous months. A reduction in these risks rekindled investor interest.
– Receding Trade War Fears: The US and China have resumed trade negotiations, and a less exaggerated tone from both sides helped boost risk sentiment in European equity and currency markets. The euro tends to benefit from global risk-on sentiment because of the region’s trade-oriented economy.
– Technical Support: From a technical analysis perspective, EUR/USD found support near the 1.1500 level earlier in the week and has since moved upward. Market participants observed strong buying interest in that range, which contributed
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