Euro retains gains despite weak German Retail Sales data as lower Oil prices provide support

• Still contained within Friday’s range, EUR/USD edges towards 1.1200.
• An unexpected fall in German Retail Sales has disappointed investors, but cheaper oil is cushioning the impact.
• Ahead of the US midterm elections, the US Dollar is trading modestly lower.

Weak German consumption figures have disappointed investors, but a retreat in oil prices from their highs and modest appetite for risk have outweighed that concern, helping the Euro (EUR) gain 0.2% against the US Dollar (USD) on Monday. At the start of the European session, EUR/USD stands at 1.1185, above last week’s highs near 1.1100, though it remains inside Friday’s trading range.

September’s German Retail Sales contracted by 2%, figures published on Monday showed, reversing August’s 1.2% increase and missing market forecasts for a 0.4% rise. Sales were down 2.3% on a year-on-year basis, following a 0.3% fall the month before.

Falling oil prices have nevertheless softened the impact of the data, offering some relief to the Eurozone’s oil-importing economies. With Qatari mediators continuing their efforts with Tehran to restart US-Iran peace talks, Brent Oil is down more than 2% on Monday, trading below $110.00.

US Dollar weakens as attention turns to US elections

Tuesday’s US midterm elections are drawing market attention as the US Dollar begins the week on a weaker footing. Against a backdrop of rising energy prices and voter frustration over the higher cost of living, recent polls suggest a Democrat victory in Congress. The Senate contest, however, is expected to be closely fought.

Plans for data centres and AI infrastructure, already encountering growing opposition nationwide, are expected to face obstacles if the Democrats secure a clear victory. The principal issue, however, is likely to be raising the debt ceiling. That ceiling will be reached in 2027, potentially triggering a serious stand-off.

A busy schedule of economic releases also lies ahead this week. Monday brings the US ISM Manufacturing Purchasing Managers Index (PMI), which will attract some attention, followed by the ISM Services PMI on Wednesday. Friday’s crucial Nonfarm Payrolls review rounds off the US calendar.

For the Eurozone, the HCOB Manufacturing PMI is due later in the day, with unemployment figures taking centre stage on Tuesday. Services PMI  and consumer inflation figures follow on Wednesday. The ECB’s Lagarde is scheduled to speak on Thursday, before September’s Retail Sales figures conclude the week on Friday.