Lower Oil prices support Euro gains despite weak German Retail Sales data

• 1.1200 is within reach for EUR/USD. The pair remains inside Friday’s trading range.
• Despite an unexpected fall in German Retail Sales, lower oil prices are tempering investor disappointment.
• Ahead of the US midterm elections, the US Dollar is modestly weaker.

The Euro (EUR) is up 0.2% against the US Dollar (USD) on Monday. A modest appetite for risk, supported by oil prices retreating from their highs, has countered disappointment over weak German consumption data. At the European session open, EUR/USD trades at 1.1185, above last week’s highs near 1.1100, though still inside Friday’s range.

Against expectations for a 0.4% increase, German Retail Sales contracted 2% in September, Monday’s figures showed. That followed growth of 1.2% in August. On an annual basis, the decline widened to 2.3% from 0.3% in the preceding month.

Cheaper oil has nevertheless softened the effect of the data, offering some relief to the Eurozone’s oil-importing economies. With Qatari mediators continuing efforts with Tehran to restart US-Iran peace negotiations, Brent Oil has fallen more than 2% on Monday to below $110.00.

US midterm elections: Dollar starts week weaker

Tuesday’s US Midterm elections are drawing market attention as the US Dollar begins the week on a weaker footing. Recent polls suggest a Democrat victory in Congress. Voters are frustrated by rising living costs as energy prices escalate, while the Senate contest is expected to be tight.

Plans for data centres and AI infrastructure, already meeting growing opposition nationwide, are expected to face obstacles if the Democrats secure a clear victory. The more significant issue, however, is likely to be raising the debt ceiling. It will be reached in 2027 and could trigger a serious standoff.

A busy week of data releases also lies ahead. Some attention will turn to the US ISM Manufacturing Purchasing Managers Index (PMI) on Monday, followed by the ISM Services PMI on Wednesday. Friday’s crucial Nonfarm Payrolls review will round off the US calendar.

Later in the day, the Eurozone’s HCOB Manufacturing PMI is due. Unemployment figures take centre stage on Tuesday, followed by Services PMI  and consumer inflation data on Wednesday. ECB’s Lagarde is scheduled to speak on Thursday, before September’s Retail Sales figures conclude the week on Friday.