EUR/USD finds temporary floor above 1.1600 level

EUR/USD seems to have found a temporary floor just above the 1.16 level. Fears over Federal Reserve independence and the continued narrowing in US-EU rate differentials should continue to provide some support for the common currency.

The extent of the move in the pair since the start of the year should act to limit upside, however, and it may be difficult for the euro to break out of the range that it has held for much of the past month, even if today’s NFP data again surprises to the downside.

Euro Area retail sales figures on Thursday morning were underwhelming, with sales dropping by 0.5% month-on-month in July - the largest downturn in almost two years.

The euro was little moved, however, in part due to the time lag in the data and perhaps the fact that we are still awaiting the effects from massive fiscal stimulus in Germany, which we do not expect to be reflected in the data until early 2026.