EUR/USD rebounds from one-month low amid improving mood

The US dollar trended broadly lower on Thursday as positive risk flows weakened demand for the safe-haven currency.

Meanwhile, the pound opens today’s session on the defensive, with GBP/EUR slipping to €1.1687 and GBP/USD dipping to $1.2715. GBP/CAD has retreated to CA$1.7217, while GBP/AUD and GBP/NZD slide to AU$1.9828 and NZ$2.1432, respectively.

Looking ahead, Sterling is likely to face considerable resistance today, following the publication of the UK’s latest retail sales figures.

What’s been happening?

The US dollar was initially buoyed during yesterday’s European session, as concerns over China’s sluggish economy spooked investors and fuelled safe-haven demand.

However, market appetite quickly recovered, leading the ‘greenback’ to fall back through the second half of the day.

Some analysts also pointed to the announcement of new tariffs on tin mill steel from Canada, China, Germany as a possible source of weakness for the US dollar.

The US dollar’s negative correlation with the euro helped to underpin the single currency on Thursday and allowed the EUR/USD exchange rate to rebound from a one-month low.

Meanwhile, trade in the pound was broadly positive yesterday as recent UK data releases continued to buoy Bank of England (BoE) interest rate expectations.

What’s coming up?

Kicking off today’s session was the publication of the UK’s latest retail sales figures.

Sales growth plummeted a startling 1.2% in July as miserable weather undermined spending. The sharper-than-expected slump in sales has piled pressure on the pound this morning and lead GBP/EUR to retreat from a one-month high.

EUR investors may look to a speech by European Central Bank (ECB) policymaker Philip Lane for fresh impetus today. If he suggests the bank has more to do in tackling inflation, the euro could rally.

This will be followed by the publication of the Eurozone’s latest consumer price index. July’s finalised CPI figures are expected to confirm inflation slowed to 5.3%, but barring a surprise revision, their impact on the euro may be negligible.

Finally, in the absence of any US data of note, any movement in the US dollar is likely to remain tied to market risk appetite. Will a downbeat mood help to revive USD demand?