The Euro (EUR) experienced broad underperformance against major currencies on Tuesday, trading 0.17% lower near 1.1400 against the US Dollar (USD) during the European session, as investors expressed doubts about further European Central Bank (ECB) rate hikes through the end of the year [1]. The Euro also traded lower against the British Pound (GBP) for the second consecutive day, approaching 11-month lows at 0.8600, despite positive economic data from the Eurozone [2].
Recent data releases showed German Retail Sales increased by 1.1% in May, following a downwardly revised 0.4% decline in April, and beating expectations of a 0.1% contraction. Year-on-year, retail consumption rose 1.8% after a 0.6% drop in April, according to Destatis [2]. However, this positive surprise failed to lift the Euro, which continued to face selling pressure. Meanwhile, the Euro was the weakest against the New Zealand Dollar and the strongest against the Japanese Yen, according to daily percentage change tables from both sources [1][2].
The ECB recently raised its policy rates by 25 basis points and warned of upside inflation risks due to Middle East conflicts. However, a ceasefire between the US and Iran has led to lower oil prices, potentially anchoring global inflation expectations [1]. ECB policymaker Olaf Sleijpen noted that falling energy prices could cool Eurozone inflation, while other officials, Pierre Wunsch and Joachim Nagel, cautioned that inflation may remain above the 2% target for some quarters due to ongoing geopolitical uncertainty [1].
Investors are awaiting the flash German Harmonized Index of Consumer Prices (HICP) data for June, expected to show a 0.1% month-on-month increase after a similar decline in May, and a cooling of annualized HICP growth to 2.6% from 2.7% [1]. Technical analysis indicates that EUR/GBP is consolidating just above support at 0.8610, with a bearish bias and momentum indicators suggesting a directionless market. Bears may need further impetus to break below year-to-date lows at 0.8604, with resistance levels at 0.8632 and 0.8657 [2].
CONCLUSION
Despite positive German retail sales and Eurozone PMI data, the Euro continued to weaken against major peers amid uncertainty over future ECB rate hikes and mixed inflation outlooks from policymakers. Market sentiment remains cautious, with technical indicators pointing to a lack of clear direction for the EUR/GBP pair. Investors are closely watching upcoming inflation data for further cues on ECB policy and Euro performance.