EUR/USD Slips Near 1.1650 Ahead of Key German Data and US PCE Inflation Report

The EUR/USD pair saw a slight decline on Friday, trading around 1.1650 as traders showed caution ahead of Germany’s crucial economic data. The Euro weakened after three consecutive days of losses, with the US Dollar (USD) regaining some strength. Investors are closely awaiting Germany’s July Retail Sales and August Consumer Price Index (CPI) data, which could offer fresh insights into the Eurozone’s economic health.

Key Events to Watch

• Germany’s Economic Data: July Retail Sales and CPI are set to release later today, which could impact the EUR. These reports are expected to shed light on consumer demand and inflationary pressures in the Eurozone’s largest economy.
• US PCE Inflation Data: Traders are gearing up for the July Personal Consumption Expenditures (PCE) Price Index data from the US, which is one of the Federal Reserve’s preferred inflation gauges. The outcome could influence future rate cut expectations.

Market Sentiment

The US Dollar’s gains were supported by a better-than-expected performance from the US economy, with the second-quarter Gross Domestic Product (GDP) increasing by 3.3%, surpassing initial forecasts of 3.1%. This has bolstered the USD, despite concerns surrounding the Federal Reserve’s (Fed) stance on interest rates.

Fed Concerns and Political Influence

Recent comments from US Vice President JD Vance have raised concerns about the Federal Reserve’s independence. Vance confirmed the US President’s intention to have more control over monetary policy, calling for elected officials to have more influence over decisions traditionally made by the Fed. This has led to heightened concerns about the future direction of US interest rates.

ECB’s Dovish Outlook

Meanwhile, the European Central Bank’s (ECB) July meeting minutes showed a cautious stance, with risks to economic growth tilted to the downside due to US tariffs and weak growth prospects. However, some members noted that long-term risks could be more positive, especially amid energy and currency uncertainties.

As market participants await the release of key inflation and economic data, the EUR/USD remains vulnerable to external pressures, with its outlook shaped by both regional economic dynamics and US Federal Reserve policy signals.

Stay updated with Daily Forex Pakistan.