EUR/USD gathers strength above 1.1700 as traders brace for German Retail Sales, CPI releases

• EUR/USD trades in positive territory near 1.1720 in Monday’s early Asian session. 

• US Consumer spending unexpectedly fell in May, undermining the US Dollar. 

• German Retail Sales and CPI inflation data will be the highlights later on Monday. 

The EUR/USD pair extends the rally to around 1.1720 during the early Asian trading hours on Monday, bolstered by a weaker US Dollar (USD). The Greenback weakens against the Euro (EUR) as traders are convinced that the Federal Reserve (Fed) will cut rates at the September meeting. The release of Retail Sales and Consumer Price Index (CPI) data from Germany will be in the spotlight later on Monday. 

Data released on Friday showed that US Personal Spending unexpectedly fell in May, the second decline this year. Meanwhile, US Personal income dropped by 0.4% in May, the largest decrease since September 2021. Traders bet that the US central bank will cut rates more times and possibly sooner than previously expected, weighing on the Greenback and creating a tailwind for the major pair. 

Across the pond, the European Central Bank (ECB) Governing Council member Klaas Knot said on Friday that the current interest rate is “a good place to be,” adding that at least one more interest rate cut of 25 basis points (bps) is anticipated toward the end of 2025. Following this comment, the swaps market continues to price in just one 25 bps rate reduction from the ECB over the next 12 months, with the policy rate expected to bottom out around 1.75%.