EURUSD has extended its recovery toward 1.0050 during the European trading hours on Friday. The greenback is having a difficult time preserving its strength ahead of Retail Sales data from the US, which could have a significant impact on the Fed’s rate outlook.
EUR/USD has managed to stage a rebound after having plunged to its weakest level in nearly 20 years at 0.9952 on Thursday and steadied above parity in the European session. The pair remains at the mercy of the dollar’s valuation and it is likely to face renewed bearish pressure in case investors start betting on a 100 basis points rate hike in July after the US data.
According to the CME Group FedWatch Tool, markets are now pricing in around a 50% probability of a 100 bps rate hike at the next meeting, compared to nearly 90% during the European trading hours on Thursday.
Later in the session, the US Census Bureau will release June Retail Sales data, which is expected to increase by 0.8% on a monthly basis following the 0.3% decline recorded in May. Since Waller specifically mentioned this data on Thursday, a stronger-than-forecast print could trigger another dollar rally and weigh on the pair and vice versa.
The US economic docket will also feature the University of Michigan’s (UOM) Consumer Sentiment Survey. The headline Confidence Index is expected to fall to a record low of 49.9 in July’s flash estimate. Market participants will pay close attention to the 5-10 year ahead inflation expectations component.