The EURUSD currency pair was trading up 35 pips as the euro rallied higher against the US dollar, boosted by the positive investor sentiment towards the single currency. The euro posted gains against the US dollar as other currencies fell against the world’s reserve currency.
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The euro’s strength against the dollar was driven by investor expectations of a 50 basis points rate hike from the European Central Bank (ECB), as many expect the US Federal Reserve to hike rates by 25 bps at its March meeting. The hawkish rhetoric from ECB policymakers seems to have worked its magic.
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The eurozone retail sales data released earlier today showed that retail sales in the region expanded by 0.3% in January, missing analysts' expectations of a 1% increase. Still, investors cheered the positive figure, adding to the recent list of positive data from the euro area.
The expansion in eurozone retail sales comes after a significant 1.7% decline in December despite the busy holiday shopping period as consumers cut down on spending due to the high cost of living in most EU countries.
The ECB has been categorical about its desire to fight the rising core inflation in the region, even as the latest retail sales data showed that consumers spent 2.1% less on automotive fuel. At the same time, food, drinks and tobacco spending surged to 1.8%.
While investors look to the ECB, which is now regarded as more hawkish than the Fed, other currencies, such as the Sterling pound and the Australian and New Zealand dollars, did not perform well against the US dollar. The Us dollar remained more robust than most major currencies.
Another critical release from the eurozone was the Global Eurozone Construction PMI from S&P, which grew to 47.6 in February compared to 46.1 in January. The upbeat construction PMI also boosted the euro despite being still in contraction territory.
The construction PMI has to rise above 50 to enter expansion territory, but seeing that the print was rising was reassuring. The EURUSD’s outlook remains positive until the ECB decision, but the situation could change if other fundamental triggers emerge.
*This is not investment advice.
The EURUSD price chart.
The EURUSD currency pair was trading up 51.0 pips (0.48%) at writing as the euro rallied against the dollar.
YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY.