Surging US inflation and resilient retail sales bolster expectations for prolonged Fed rate hikes, weighing on the euro.
EUR/USD fell for a fifth straight session to around 1.1650 in Asian trading Friday, pressured by a stronger US dollar. Rising inflation tied to Middle East tensions has reinforced market expectations that the Federal Reserve will keep rates elevated or raise them further.
US retail sales rose 0.5% month-over-month in April, matching estimates but slowing from March’s 1.6% gain. Year-over-year sales climbed 4.9%, surpassing the 3.3% forecast, signaling robust consumer demand despite higher borrowing costs. The dollar also gained on shifts in Fed leadership, with Kevin Warsh poised to take over as chair following Stephen Miran’s resignation.
The euro’s decline may be limited as fading hopes for a US-Iran deal keep the Strait of Hormuz closed, stoking inflationary pressures in the Eurozone. Markets now price in a near-certain ECB rate hike in June, with three more increases expected by end-2026.