Title: EUR/USD Rebounds Amid Disappointing U.S. Retail Data, Impacting Fed Rate Cut Outlook
Original article by Felipe Erazo for FXStreet
The EUR/USD currency pair saw a notable rebound during the trading session on August 15, 2025, following the release of weaker-than-expected U.S. retail sales data for July. The softer data put a damper on expectations surrounding further interest rate hikes from the Federal Reserve, thereby influencing the U.S. Dollar’s strength and allowing the euro to recover some ground.
This article deeply explores the context of the recent EUR/USD movement, the economic data impacting both currencies, and the broader implications for future monetary policy from the Federal Reserve and the European Central Bank (ECB).
Key Points:
– The U.S. Dollar weakened after July retail sales data came in below economists’ expectations
– EUR/USD capitalized on the softer dollar, climbing from session lows
– Recent dovish rhetoric from the Federal Reserve has gained traction amid slowing consumer demand
– Market participants reassess the likelihood of future U.S. rate hikes or potential cuts
US Retail Sales Disappoint in July
According to the U.S. Census Bureau, July’s retail sales grew by 0.1 percent on a monthly basis, a significant miss when compared to the market’s expectations of a 0.4 percent increase. Additionally, core retail sales, which exclude automobiles, gasoline, building materials, and food services and are crucial in calculating gross domestic product (GDP), fell by 0.2 percent.
The weak data signals a slowdown in consumer spending, one of the key engines of the U.S. economy and a vital metric for the Federal Reserve when considering monetary policy moves. A decline in core components suggests reduced momentum in the economy despite resilient job market data seen earlier in the year.
– Headline Retail Sales (July): +0.1% (vs. +0.4% expected)
– Core Retail Sales (July): -0.2% (vs. +0.3% expected)
– Previous month was revised upward slightly for some categories, softening the immediate impact
Traders responded swiftly to the data release, sending U.S. Treasury yields lower. The yield on the 10-year note dropped by several basis points, reflecting decreased expectations for any potential monetary tightening in the near term.
Effect on Federal Reserve Policy Expectations
The surprise deceleration in retail spending has realigned expectations for U.S. monetary policy. Throughout July and early August, Fed officials had struck a cautiously hawkish tone, suggesting that while inflation was cooling, they remained committed to their inflation target of 2 percent and would keep monetary options open. However, the latest retail figures may give the central bank reasons to prioritize economic stability over stringent inflation controls.
Before the retail data release, futures markets had priced in roughly a 40 percent chance of another Fed rate hike before year-end. In the immediate aftermath of the new figures, those odds dropped below 25 percent, according to CME Group’s FedWatch Tool.
The key takeaways driving sentiment:
– Slower consumer spending may reduce inflationary pressures organically
– Market now leans toward the Fed pausing in future meetings
– Some analysts have even started to pencil in potential rate cuts in early 2026
EUR/USD Reaction and Eurozone Context
Against this backdrop, the euro found support, leading to a modest recovery in the EUR/USD pair. After initially dipping earlier in the session, the pair rebounded, climbing toward the 1.0950 resistance level. Increased euro demand combined with dollar softness contributed to the currency’s strengthening.
Technical analysis reflects the shift in momentum:
– EUR/USD bounced off a support level near 1.0875
– The 50-day simple moving average (SMA) still holds beneath the current price, offering bullish technical support
– Traders are eyeing the 1.1000 psychological level as a potential upside target
Beyond the technicals,
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