Euro rallies following a decline in US retail sales and Treasury yields

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The Euro climbed in early trading during the North American session against the US Dollar after a softer-than-expected US retail sales report sparked a drop in US yields and, consequently, the Greenback. The EUR/USD exchanges hands at 1.0784 after hitting a daily low of 1.0723. The US Commerce Department revealed retail sales fell more than the -0.1% contraction estimated, came at -0.8% blamed on winter storms. December’s data was revised lower, from 0.6% to 0.4%. At the same time, the US Bureau of Labor Statistics (BLS) revealed that unemployment claims for the week ending February 10, came at 212K, below the previous reading and forecasts of 220K.

The EUR/USD gathered cues and rose as the US 10-year Treasury bond yield dropped five basis points to 4.209%, while the US Dollar Index (DXY) plunged 0.50% at 104.20. Even though there are expectations that the US Federal Reserve will cut rates in 2024, traders speculate the Fed will slash the federal funds rates (FFR) to 4.40%. In the European session, Christine Lagarde, the President of the European Central Bank (ECB), said the ECB would be watching closely the outcome of upcoming Eurozone wage negotiations. Aside from this, the Balance of Trade printed a surplus of EUR 16.8 billion, narrower than the 21.5 billion expected. Additional data from the US was revealed, with Industrial Production for January plunging -0.1% below estimates of 0.3% and from last month’s 0% reading. Ahead in the day, ECB Chief Economist Philip Lane will cross the wires. On the US front, Fed Governor Christopher Wall would be speaking. The EUR/USD daily chart remains neutral to a downward bias despite recovering from weekly lows below the 1.0700 figure. Unless buyers reclaim the 100-day moving average at 1.0795, that could open the door to testing the 1.0800 mark. Conversely, if bears regain control, pushing the exchange rate below 1.0750 would open the door to challenging 1.0700.


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