Euro Area retail sales increase 0.6% Y/Y in July, fall 0.6% M/M

The Euro (EUR) remains relatively stable above 1.1600 against the US Dollar (USD) on Friday, with upward movements hindered by this level. Investors are cautious about selling US Dollars prior to the US Nonfarm Payrolls (NFP) release, which may shed more light on the Federal Reserve's September monetary policy meeting. On Friday, Germany reported a 2.5% increase in July Factory Orders, surpassing expectations of a 0.3% rise and following a 3.7% growth in June.

Year-on-year, industrial product orders in Germany surged 13.1%, nearly double June's 7.2% increase. Later, Eurozone Retail Sales are anticipated to indicate a 0.3% rise in July consumption, reversing the 0.3% decline in June. ECB member Philip Lane is expected to address the press, potentially reaffirming the bank's readiness for further interest rate hikes.

The day's key event is the US NFP report, set to be released during the US session, although its impact on the US Dollar may be less pronounced this time, as traders may wait for the upcoming Consumer Price Index (CPI) figures to evaluate the likelihood of a rate hike at the Fed meeting on September 15 and 16. Analysts from TD Securities believe that "inflation is the more crucial aspect of the NFP's strength," stating that "a robust payrolls report could give the USD a slight boost, but it is unlikely to prompt the committee into a hike unless paired with a strong inflation report."

Under these conditions, a +40-50k upward surprise to the consensus median, as anticipated, could result in a modest +0.2% immediate reaction of the USD. Fed Governor Christopher Waller urged the Federal Reserve to consider a temporary halt to interest rate hikes during his comments on Thursday, suggesting that the current rate setting could potentially bring inflation back to the 2% target.

This position has reduced the odds of a rate hike in September to a coin toss. German Factory Orders, which include shipments, inventories, and new and unfilled orders, serve as an indicator of the German economy's growth. A higher factory order total may suggest an expansion in the economy and could be an inflationary factor. However, Germany's Factory Orders have a limited impact on the overall Eurozone GDP.

Retail Sales data, published monthly by Eurostat, measures the volume of retail sales in the Eurozone, reflecting the performance of the retail sector, which accounts for around 5% of the total value added in Eurozone economies. High readings are generally perceived as positive (bullish) for the Euro (EUR), while low readings are considered negative (bearish).