EUR/USD sees a downside to near 0.9950 as DXY strengthens, US Retail Sales in focus

The EUR/USD pair is dropping gradually after establishing below the magical figure of 1.0000 in the Asian session. The asset is expected to display more weakness and will slip to near 0.9950 as the US dollar index (DXY) is gaining strength. The DXY is aiming to recapture the psychological resistance of 110.00 as the odds of a full percent rate hike by the Federal Reserve (Fed) are skyrocketing.

After reading an above-expected US inflation rate this week, it is highly likely that the Fed will scale up the pace of hiking interest rates. Fed’s foremost priority is to bring price stability in the economy and for that growth prospects and employment have to make a lot of sacrifices. The market participants were expecting that falling gasoline prices and a spree of hiking interest rates will cool down the ultra-hot inflation, however, the price pressures have not responded well to the former.

In today’s session, investors will keep an eye on the US Retail Sales data. The catalyst is expected to remain subdued as estimates are displaying so improvement in the retail demand. A subdued retail demand is a sign of a decline in consumers’ confidence in the respective economy.

On the Eurozone front, chances of stagflation have increased in the trading bloc as cited by European Central Bank (ECB) member Robert Holzmann. The ECB member further added that the central bank has underestimated the pace of inflation and to scale down the same the ECB will announce more rate hikes this year. However, the extent of hikes will remain data-dependent.