EUR/USD declines to 4-week lows

The EUR/USD retreated to fresh lows at around 1.0720s because of the stronger US dollar. Last week’s EU retail sales disappointed, while factory activity in Germany improved as orders rose as risks are tending to the downside.

The EUR/USD extended its decline to new four-week lows at around 1.0720s due to broad US dollar strength after last Friday’s data reaffirmed the need for higher US interest rates. Money market futures began to price in higher interest rates, underpinning the US Treasury bond yields and the buck.

At the time of writing, the EUR/USD exchanges hands at 1.0730. Factory orders in Germany advanced, though the Euro remains downward pressured. The EUR/USD lost traction on Friday, as the US Department of Labour revealed that 517K jobs were added to the economy, crushing the 200K expectations and sending the Unemployment Rate dipping towards 3.4% from 3.5%.

NFP data triggered selloff of currencies, except the buck in the FX space, particularly the Euro. Even though the ECB raised rates by 50 bps, President Lagarde’s press conference was perceived as dovish, albeit the chorus of hawks expecting further aggression by the central bank.

The European docket reported soft Retail Sales for December, which plunged to -2.7% MoM, vs. a -2.5% contraction expected. Consequently, the YoY rate was -2.8% compared to -2.7% estimates by street analysts.