EUR/USD holds losses below 1.0400 ahead of Eurozone Retail Sales data

EUR/USD remains subdued as traders adopt caution ahead of Eurozone Retail Sales due on Thursday.
ECB officials are confident about inflation sustainably returning to the central bank’s target of 2% this year.
Fed’s Jefferson expressed his satisfaction with keeping the Fed Funds rate at its current level.

EUR/USD depreciates after two days of gains, trading around 1.0390 during the Asian session on Thursday. Traders await Eurozone Retail Sales data scheduled to be released later in the day.

Market forecasts anticipate Pan-European Retail Sales to grow 1.9% year-over-year in December, up from a 1.2% rise in the previous month. However, the MoM figure for December is expected to decline by 0.1%, against the previous 0.1% increase.

The Euro remains subdued amid ongoing expectations that the European Central Bank (ECB) will continue with its policy-easing spree, given that officials are confident about inflation sustainably returning to the central bank’s target of 2% this year.

The EUR/USD pair could have received downward pressure as the US Dollar Index (DXY), which measures the US Dollar’s (USD) value against six major currencies, holds ground following its three-day losing streak. The DXY trades around 107.70 at the time of writing.

On Thursday, Federal Reserve Vice Chair Philip Jefferson expressed satisfaction with maintaining the current Fed Funds rate, stating that he plans to assess the overall impact of Trump’s policies before making further decisions. He also highlighted that, despite a 100-basis-point decrease, the Fed’s rate remains restrictive for the economy.

On Wednesday, the weaker US Services Purchasing Manager Index (PMI) weighed on the Greenback. The US ISM Services PMI eased to 52.8 in January from 54.0 (revised from 54.1) in December. This reading came in below the market consensus of 54.3. Traders brace for Friday’s US Nonfarm Payrolls (NFP) data, which is expected to shape the Federal Reserve’s (Fed) monetary policy direction.

Economic Indicator

Retail Sales (YoY)

The Retail Sales data, released by Eurostat on a monthly basis, measures the volume of retail sales in the Eurozone. It shows the performance of the retail sector in the short term, which accounts for around 5% of the total value added of the Eurozone economies. Retail Sales data is widely followed as an indicator of consumer spending. Percent changes reflect the rate of changes in such sales, with the YoY reading comparing sales volumes in the reference month with the same month a year earlier. Generally, a high reading is seen as bullish for the Euro (EUR), while a low reading is seen as bearish.