EUR/USD gains after mixed US data, focus shifts to Trump-Putin meeting

• EUR/USD rises 0.47% to 1.1702, shrugging off in-line July US Retail Sales and upward June revision.
• Market focus on Trump-Putin summit in Anchorage; analysts skeptical about securing Ukraine ceasefire.
• UBS sees EUR/USD reaching 1.21 by year-end if truce achieved.
• US consumer sentiment weakens in August amid inflation fears despite strong spending data.

EUR/USD reverses its course, climbs on Friday, ignoring solid US Retail Sales data due to market participants still pricing in a Federal Reserve (Fed) rate cut in September. The pair trades at 1.1702, up 0.47%.

The market's attention turned to Anchorage, Alaska, for the summit of US President Donald Trump and Russian President Vladimir Putin, with analysts' expectations remaining low for achieving a ceasefire in Ukraine. Meanwhile, Trump said that he doesn't know what would make the reunion a success and that he would like to reach a truce before Washington and Moscow can talk about other issues.

According to some analysts, a truce would be bullish for the Euro, which, according to UBS analysts, would reach 1.21 against the US Dollar by the end of the year.

Aside from this, Retail Sales in the US were solid in July, while the June print was upwardly revised, signaling the strength of consumers. Nonetheless, the University of Michigan Consumer Sentiment survey in August showed a deterioration of American households, sparked by expectations of a reacceleration of inflation.

Across the pond, the following week's European Union (EU) economic schedule will feature Flash PMIs for the bloc to provide further evidence of a recovery in the manufacturing sector. Also, the EU and Germany's inflation figures could cement the case that the European Central Bank (ECB) can pause its easing cycle, providing further support for the shared currency.

Daily digest market movers: EUR/USD shrugs off strong US Retail Sales report

• Euro's advance is sponsored by broad US Dollar weakness as the Greenback is poised to sustain 0.43% losses in the week. The US Dollar Index, which measures the buck's performance against a basket of peers, drops 0.36% daily, down to 97.84.
• Retail Sales in the US rose by 0.5% MoM in July, matching expectations but slowing from June's upwardly revised 0.9% gain. On an annual basis, growth dipped to 3.9% from 4.4% in June.
• Industrial Production contracted by 0.1% in July, following a 0.4% increase in June and missing forecasts for no change, according to Federal Reserve data.
• Consumer Sentiment, as revealed by the University of Michigan, showed that American consumers grew pessimistic, with the index falling to 58.6 in August from 61.7 in July, missing estimates of 62.0. Inflation was cited as the primary driver of the sudden change in consumers' mood as one-year inflation expectations rose to 4.9% from 4.5% and the five-year outlook climbed to 3.9% from 3.4%.
• Following the latest US data releases, the Atlanta Fed's GDPnow Q3 projection remained unchanged at 2.5%.
• Fed Interest Rate Probabilities show that traders have priced in a 95% chance of a 25 bps rate cut at the September meeting, according to Prime Market Terminal data.
• On the European Central Bank (ECB) front, the easing cycle seems to be on pause for the September meeting, with 94% odds for the ECB to keep rates unchanged and a slim 9% chance of a 25 bps rate cut.

Technical outlook: EUR/USD rises past 1.1700 as bulls target 1.1800

The EUR/USD uptrend resumes on Friday, yet bulls must achieve a daily close above 1.1700 to pave the way for further upside. Momentum as measured by the Relative Strength Index (RSI) shows that further upside is seen, but buyers need to surpass the July 24 high of 1.1788, so they can challenge 1.1800 and the year-to-date (YTD) high of 1.1829.

On the flip side, a daily close below 1.1700 could put into play a test of the confluence of the 20-day and 50-day Simple Moving Averages (SMAs) around 1.1624/30. Further losses are seen below at 1.1600.