Lower Oil prices help Euro retain gains despite weak German Retail Sales figures

• Still confined to Friday’s trading range, EUR/USD edges towards the 1.1200 region.
• Cheaper Oil is cushioning investor disappointment following the surprise fall in German Retail Sales.
• Ahead of the US midterm elections, the US Dollar trades with a mildly weaker bias.

Modest appetite for risk supports the Euro (EUR) on Monday, lifting it 0.2% against the US Dollar (USD). A retreat in Oil prices from their highs has outweighed investor disappointment over weak German consumption data. At the start of the European session, EUR/USD trades at 1.1185, above last week’s highs near 1.1100, although it remains inside Friday’s range.

Against forecasts for a 0.4% increase, German Retail Sales contracted 2% in September after rising 1.2% in August, figures published on Monday showed. On a year-on-year basis, the decline deepened to 2.3% from 0.3% in the preceding month.

Falling Oil prices have nevertheless softened the effect of the weak figures, offering some relief to the Eurozone’s Oil-importing economies. As Qatari mediators continue working with Tehran to restart US-Iran peace negotiations, Brent Oil is down more than 2% on Monday at levels below $110.00.

Why is the US Dollar under pressure ahead of the US elections?

With markets shifting their attention to Tuesday’s US Midterm elections, the US Dollar has started the week on a weaker footing. Voter frustration over rising living costs, against a backdrop of surging energy prices, accompanies recent polls pointing to a Democrat victory in Congress. The Senate contest, however, is expected to be closely fought.

Plans for data centres and AI infrastructure, already encountering growing opposition nationwide, are expected to face obstacles if the Democrats secure a clear victory. The central issue, however, is likely to be raising the debt ceiling: it will be reached in 2027 and could trigger a serious standoff.

A busy data calendar also awaits markets this week. Some attention will turn to Monday’s US ISM Manufacturing Purchasing Managers Index (PMI), before the ISM Services PMI release on Wednesday. Friday’s crucial Nonfarm Payrolls review will round off the US schedule.

For the Eurozone, the HCOB Manufacturing PMI is due later in the day, followed by unemployment figures on Tuesday. Services PMI  and consumer inflation figures are scheduled for Wednesday; ECB’s Lagarde is due to speak on Thursday, before September’s Retail Sales release wraps up the week on Friday.