Weaker US retail sales and inflation data reduce expectations for further Federal Reserve tightening, lifting the euro against the dollar.
The EUR/USD pair rose to 1.1575 in early Asian trading Monday, extending gains as the US dollar weakened. Soft US economic data, including a 0.6% month-over-month drop in July retail sales, fueled speculation the Federal Reserve may pause rate hikes.
Retail sales fell short of the 0.1% growth forecast, while annual sales growth slowed to 5.0% from 6.8% in June. Earlier releases showed softer CPI and PPI readings, further dampening Fed rate hike bets. Markets now price a 33.1% chance of a September hike, down from 44% last week.
Investors await European Central Bank President Christine Lagarde’s speech Wednesday for further policy cues. Geopolitical risks, including Middle East tensions, could still support the dollar as a safe-haven asset.