EUR/USD remains lackluster around parity, US Retail Sales, Fed bets eyed

• EUR/USD fails to cheer recently hawkish comments from the ECB policymakers, stays sidelined at weekly low.
• EU announced energy plan but failed to impress Euro buyers.
• Softer US data, mixed concerns surrounding Fed appear to test the traders.
• Risk catalysts, US Retail Sales for August will be important for fresh impulse ahead of next week’s FOMC.

EUR/USD struggles to restore the trader’s confidence while taking rounds to 0.9980-85 during the initial Asian session on Thursday. In doing so, the major currency pair fails to cheer hawkish comments from the European Central Bank (ECB) policymakers, as well as the European Commission’s (EC) release of an energy plan. The reason could be linked to the expectations of more geopolitical tension with Russia and the hawkish Fed hopes.

Recently, ECB policymaker Robert Holzmann has stated that the central bank's rates will be higher in a year but hikes will be data-dependent. Before that, ECB’s Constantinos Herodotou said, “ECB’s latest decision to hike the key rates does not mean there has been a forgone conclusion on the final level of interest rate.” Above all, ECB Chief Economist Philip Lane said on Wednesday that the current transition will require the ECB to continue to raise interest rates over the next several meetings, as reported by Reuters.

Further, the European Commission announced on Wednesday that it proposed a voluntary target for European Union countries to cut overall monthly electricity use by 10% compared to the same period in recent years, as reported by Reuters. “EU proposes windfall levy to claw back surplus profits from fossil fuel companies,” the news also mentioned.

Talking about the data, Eurozone’s Industrial Production fell 2.3% MoM in July versus the 1.0% expected contraction.

On the other hand, US Producer Price Index (PPI) declined to 8.7% YoY in August from 9.8% in July, versus 8.8% market forecasts. Details suggest that the PPI ex Food & Energy, better known as Core PPI, also eased to 7.3% YoY from 7.6% but surpassed the market expectation of 7.1%.

It should be noted that US President Joe Biden’s rejection of US fears and China’s stimulus are some of the key developments that should have favored the risk appetite and the EUR/USD prices. However, the Sino-American tussles and the energy crisis in Europe seemed to have challenged the optimism.

Against this backdrop, the Wall Street benchmarks printed mild gains while the Treasury yields retreated from the multi-day high, posting mild losses at the end.

Looking forward, the US Retail Sales for August, expected to remain unchanged at 0.0%, will be important to watch for clear intraday directions. Also important will be the market bets on the Fed’s next moves.

Also read: Australian Employment Preview: Will labor market upturn save the aussie?

Technical analysis

EUR/USD recovery remains elusive unless crossing the 50-DMA hurdle surrounding 1.0100. However, multiple supports around 0.9950, 0.9900 and the latest multi-year low near 0.9860 could challenge the bears.