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- EUR/USD is oscillating around 1.0000, more weakness expected on Eurozone stagflation fears.
- An unexpected improvement in US Retail Sales is keeping the DXY at elevated levels.
- Investors are blaming the ECB for underestimating the pace of inflation.
The EUR/USD pair is displaying back-and-forth moves below the magical figure of 1.0000 in the early Tokyo session. On a broader note, the asset has turned sideways in a range of 0.9955-1.0025 after nosediving from Tuesday’s high at 1.0187. Usually, a consolidation phase after a perpendicular fall is followed by a resumption in the downside move due to a lack of optimism in the market participants.
On Thursday, the asset displayed a less-confident pullback after re-testing Tuesday’s low around 0.9955. The pullback move is expected to conclude sooner and will convert into a sheer fall on higher expectations for US Michigan Consumer Sentiment Index (CPI).
The US consumer sentiment data is seen higher at 60 against the prior release of 58.2. It is worth noting that the sentiment data is in a recovery mode after dropping to 50 in June. In the past two months, the confidence of consumers is returning led by a solid labor market, falling gasoline prices, and higher growth prospects.
Also, the US Retail Sales data on Thursday landed higher at 0.3% against the expectations of stagnancy and the prior decline in retail demand by 0.5%. This indicates that the retail demand is returning and eventually the confidence of consumers despite higher-than-expected inflationary pressures.
On the Eurozone front, investors should brace for a period of stagflation amid a deepening energy crisis and an accelerating price rise index. Investors are blaming the European Central Bank (ECB) for underestimating the pace of price pressures. A delayed response by ECB policymakers towards the inflation mess has pushed it to 9.1% and a consensus for a double-digit figure cannot be ruled out.