The EUR/USD pair pulled back sharply after briefly touching a 16-week high above 1.0900 on Monday, as traders reassessed their positions ahead of Thursday’s European Central Bank (ECB) rate decision. The pair’s retreat coincided with cautious commentary from Federal Reserve (Fed) officials, who reiterated a data-dependent approach to potential rate cuts.
Market Drivers and Outlook
Fed Chair Jerome Powell and San Francisco Fed President Mary Daly both emphasized that the timing of future rate cuts will depend on incoming economic data, despite recent signs of easing inflation. While markets have fully priced in a September rate cut, the Fed’s messaging remains cautious.
Meanwhile, the upcoming release of US Retail Sales data on Tuesday will provide further insights into the strength of consumer spending and the broader US economic outlook.
Euro traders are eagerly anticipating Thursday’s ECB rate decision, where a follow-up rate cut to June’s quarter-point trim is widely expected, but not until September. This expectation aligns with recent comments from ECB officials, who have indicated a preference for making rate decisions at their forecast meetings.
EUR/USD Technical Analysis: Consolidation at Channel Resistance
The EUR/USD pair is currently consolidating at the top end of a descending price channel, after failing to hold above 1.0900. The pair ended a three-day winning streak, signaling a potential shift in momentum.
Key Points:
- EUR/USD retreats from 16-week high as traders await ECB rate decision.
- Fed officials reiterate data-dependent approach to rate cuts.
- US Retail Sales data on Tuesday could provide further clues on Fed policy.
- ECB expected to deliver follow-up rate cut in September.
- EUR/USD consolidates at top end of descending channel.
