EUR/USD retreats amid market optimism ahead of US PPI.
Euro gained ground on Thursday as the US Dollar declined after disappointing Retail Sales data.
ECB’s Villeroy stated that there are several reasons for not waiting too long before the first rate cut.
US Retail Sales (MoM) declined 0.8% in January compared to the expected 0.1% decline.
The EUR/USD pair retreats after two days of gains, edging lower to near 1.0770 on Friday. The market optimism supports the US Dollar (USD) against the Euro (EUR) ahead of key data events, particularly the Producer Price Index (PPI) and Michigan Consumer Sentiment Index from the United States (US) scheduled to be released on Friday.
European Central Bank (ECB) Governing Council member Francois Villeroy de Galhau mentioned that there are several reasons why they should not wait too long before the first rate cut. While the idea of a rate cut this year appears likely, the exact timing is still under consideration. There's ample room for adjusting rates without immediately resorting to an accommodative monetary policy.
The US Dollar Index (DXY) attempts to retrace its recent losses on the back of higher US Treasury yields. The market sentiment is biased to the idea that the US Federal Reserve (Fed) will avoid rate cuts in March and May. The CME FedWatch Tool shows a 52% likelihood of a 25 basis points (bps) rate cut in June. The disappointing US Retail Sales data on Thursday contributed downward pressure to undermining the US Dollar, which in turn, acted as a tailwind for the EUR/USD pair
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