• EUR/USD retraces Monday's gains on Tuesday, pulling back to 1.1385.
• The Euro has been unfazed by the unexpected increase in German Retail Consumption.
• Markets are on a wait-and-see stance ahead of a string of key US employment releases.

The Euro (EUR) is trimming recent gains against the US Dollar (USD) on Monday, trading at 1.1385 at the time of writing after being rejected near 1.1430. This leaves the pair close to yearly lows, on track to end June with a nearly 2.30% decline, its weakest monthly performance since July last year.

The pair has been unfazed by the upbeat German Retail Sales report, which showed a 1.1% increase in May, following a downwardly revised 0.4% decline in April, and beat expectations of a 0.1% contraction. In the twelve months to May, retail consumption rose 1.8%, following a 0.6% drop in April, according to data released by Destatis on Tuesday.

Fed hiking bets are buoying the US Dollar

The US Dollar, on the other hand, remains bid, buoyed by market hopes that the US Federal Reserve (Fed) might hike interest rates as soon as September. Recent macroeconomic data has revived the narrative of US exceptionalism in a context of high inflationary pressures stemming from Iran’s war, which has prompted the central bank to adopt a more hawkish stance.

Beyond that, the US Supreme Court has refuted US President Donald Trump’s attempt to fire Fed Governor Lisa Cook, curbing doubts about the central bank’s independence.

FX volatility, however, remains subdued with investors awaiting a string of key US employment indicators that might determine the Fed’s rate hike calendar. The focus on Tuesday will be on the JOLTS Job Openings data, although the highlight of the week is Thursday’s Nonfarm Payrolls (NFP) report. June’s payrolls are expected to show an 110K increase in net employment, after 172K in May, to confirm that the US economy keeps creating employment at a solid pace.

On the geopolitical front, news reports that US and Iranian negotiators are in Doha to resume peace talks, although it is unclear when they will meet. Markets nevertheless remain hopeful of a negotiated outcome of the conflict, which is keeping Oil prices at pre-war levels and providing some support to the Euro.