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17 Oct 2023

EUR/USD consolidates its gains above 1.0550, eyes on ZEW survey, US Retail Sales

  • EUR/USD takes a breather after recent gains around 1.0559 in early Monday.
  • European Central Bank (ECB) President Lagarde said the ECB is watching energy prices and the Israel-Hamas conflict for inflation risks.
  • US NY Empire State Manufacturing Index for October fell to 4.6 vs. 1.9 rise prior, better than expected.
  • Investors will monitor the ZEW Economic Sentiment Survey for October, the US Retail Sales for fresh impetus.

The EUR/USD pair consolidates its recent gains during the early Asian trading hours on Tuesday. Market players await the ZEW Economic Sentiment Survey for October, which is expected to improve from -8.9 to -8.0. The major pair currently trades around 1.0559, losing 0.02% for the day.

The European Central Bank (ECB) President Christine Lagarde told euro-area finance ministers that the ECB is watching energy prices and the Israel-Hamas conflict for inflation risks. Meanwhile, ECB's chief economist Philip Lane said in an interview that the ECB's decision to raise interest rates took longer than the Fed due to several factors. Lane further stated that they will keep interest rates high until inflation returns to 2%, but this may take some time.

Economic data on Monday revealed that German Wholesale Prices grew 0.2% MoM in September, worse than the market consensus of a 0.3% rise. On an annual basis, the figure fell -4.1% from the previous reading of -2.7%.

Across the pond, many Federal Reserve (Fed) officials including Chicago Fed President Austan Goolsbee and Philadelphia Fed President Patrick Harker maintained their dovish stance. Harker stated on Monday that the central bank should not create new pressures in the economy by increasing the cost of borrowing. Harker added that in the absence of some turn in the data Fed should hold rates steady. The additional dovish comments from the Fed officials this week might weigh on the US Dollar (USD) and act as a tailwind for the EUR/USD pair.

About the data, the US NY Empire State Manufacturing Index for October fell to 4.6 from 1.9 rise in the previous reading, better than the expectation of a 7.0 decline, the Federal Reserve Bank of New York reported on Monday. The data suggest a possible softening in manufacturing activity at the start of the fourth quarter.

Moving on, market participants will monitor the ZEW Economic Sentiment Survey for October and the US Retail Sales due later on Tuesday. Later this week, the European Central Bank (ECB) President Lagarde's speech and Federal Reserve officials' speech could offer hints about the interest rate path and give a clear direction to the EUR/USD pair.

 

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