Euro Rebounds on Dollar Weakness, Shrugging Off Softer Economic Data

[DailyFx]

The Euro rebounded today despite weaker economic data. Both French producer prices and retail PMI for July deteriorated, providing further evidence that the strength of the Euro is finally weighing on the economy. That does not seem to matter however as speculators talk about the possibility of a surprise press conference by the ECB this week. They are expected to leave interest rates unchanged, but if the market is pricing in a good chance of a September rate hike. If the ECB plans on delivering one then, they will have to find an opportunity to reintroduce the words "strong vigilance."

Now that the EUR/USD is close to 200 pips off its highs, the economy may be able to handle another rate hike. However we still think that a surprise press conference is unlikely given the recent comments by ECB officials. Last week, ECB member Stark said the strong euro was hurting exporters while Quaden indicated that the central bank was against abrupt and excessive currency moves. Looking ahead we are expecting German retail sales, unemployment and Eurozone confidence. Switzerland on the other hand will be reporting their UBS consumption index which is barometer of consumer spending.