Synopsis:

Danske Bank's attention this week is centered on the US CPI and retail sales data, with potential implications for the EUR/USD pair. The anticipated softer inflation figures could sway market sentiment, influencing demand for high-yielding assets and the near-term trajectory of EUR/USD.

Key Insights:

1. US CPI Forecast: Danske predicts a headline CPI of 0.1% month-over-month and a core CPI of 0.3% month-over-month for October, aligning with consensus expectations. Softer-than-expected CPI data could reinforce the perception that central banks are concluding their rate hike cycles, fostering a positive market sentiment shift.

2. Retail Sales as an Economic Indicator: The release of US retail sales data on Wednesday is crucial. It will provide insights into the current state of the US economy, especially after the strong figures observed last month. This data could play a significant role in shaping USD trends in the near term.

3. EUR/USD Outlook: Given recent signals of a weakening US economy, which contributed to the recent depreciation of the USD, Danske anticipates a continued upward trend for EUR/USD in the near term. However, factors such as US yield movements and the Fed's communication could also affect this trend.

4. Market Sensitivity to Data Releases: The upcoming CPI and retail sales data are set to be closely monitored by markets, potentially acting as catalysts for currency movements. Investors and traders are advised to stay alert to these key economic indicators.

Conclusion:

This week's US CPI and retail sales data releases are poised to be significant determinants of the near-term direction of EUR/USD. Danske Bank anticipates that softer inflation figures may bolster high-yielding assets like the EUR, contributing to an upward trend in EUR/USD, especially in the context of a perceived weakening in the US economy.