EUR/USD Tumbles as Stronger Dollar and Weaker Sales Weigh on Euro

The EUR/USD pair is trading below 1.16 as the euro comes under pressure from a stronger U.S. dollar, weaker German retail sales, and rising oil prices ahead of Eurozone inflation data.

German retail sales fell 3.4% in July, their sharpest decline in more than four years, compared to expectations for a 0.4% increase. This data raises fresh questions over the strength of the German consumer and comes at an awkward time for the ECB, with inflation expected to accelerate to 3.3% in August from 2.9%. A hotter inflation reading would strengthen the case for an ECB rate hike this month.

The dollar is benefiting from higher Treasury yields and a more hawkish tone from Fed Chair Kevin Warsh at Jackson Hole. Markets are now pricing in around a 65% probability of a September rate hike, up sharply from last week. The Middle East tensions are also supporting the dollar through safe-haven demand, while higher oil prices add to U.S. inflation concerns.