- Euro (EUR) under pressure in risk off trading as demand for safe haven US Dollar (USD) rises
- ECB monetary policy meeting in focus, no changes expected
- Chinese retail sales data and rising US – Chinese tensions unnerve investors
- US retail sales and initial jobless claims in focus
The Euro US Dollar (EUR/USD) exchange rate is trading mildly lower, snapping a four day winning run. The pair settled on Wednesday +0.1% at US$1.1411 after having reached a 4-month high of US$1.1452. At 07:15 UTC, EUR/USD trades -0.05% at US$1.1404.
The Euro has been well supported over recent sessions thanks to solid economic data indicating that the recovery is on track and as Europe appears to have the coronavirus outbreak under control. Covid flare ups being quick brought under control.
Attention will now turn towards the European Central Bank meeting. The central bank is not expected to make any changes to policy, particularly after the above forecast increase in the Pandemic Emergency Purchase Programme and amid tentative signs of economic recovery. The ECB are expected to return to their frequently seen wait and see mode.
Risk sentiment has taken a hit in the Asian session, despite China reporting stronger than forecast economic growth of 3.2% in the second quarter. This was ahead of the 2.5% forecast. However, investors focused on retail sales data which fell for a 5th straight month.
Falling Chinese retail sales highlight the cautiousness of the Chinese consumer, who is steering clear of areas of potential crowds such shopping centres whilst reining in consumption owing to an uncertain outlook.
Investors fear that the caution being seen in the Chinese consumer could be a sign of what is to come in the US whose economy is hugely dependent on the consumer.
US retail sales in in focus. US retail sales are expected to increase 5% month on month in June, down from May’s 17.7% surge as the economy reopened. Whilst this is still strong it could still be pent up demand being released.
Rising tensions between the US and China is also adding to the downbeat tone. The White House is expected to take action over perceived security risks posed by TikTok and WeChat.
