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• EUR/USD trades with a mild negative bias around 1.0950 in Tuesday’s early European session. 
• Fed’s Goolsbee said the central bank could take action if the economy deteriorated.  
• Traders await the Eurozone Retail Sales on Tuesday for fresh impetus, which is expected to ease to 0.1% YoY in June. 

The EUR/USD pair trades with mild losses around 1.0950 during the early European trading hours on Tuesday. The improved risk sentiment provides some support to the Greenback and caps the major pair’s upside. Traders will take more cues from the release of Eurozone Retail Sales, which is expected to ease to 0.1% YoY in June. 

The sell-off spread across the financial markets on Monday as investors were concerned about the recession in the US economy. This, in turn, dragged the US Dollar (USD) lower to the year-to-date lows near 102.15. However, a turnaround in the global risk sentiment alleviates some fears in the market. “Markets panicked after the U.S. employment report on Friday,” said Andrzej Szczepaniak, an economist at Nomura. Traders are now pricing in around 60% odds of emergency easing by the US Federal Reserve (Fed). 

On Monday, Chicago Fed President Austan Goolsbee noted that the Fed would respond if economic or financial conditions deteriorate. Any comments from Fed officials about earlier rate cuts might undermine the USD in the near term. 

On the bright side, the US ISM Service Purchasing Managers Index (PMI) came in stronger than expected, rising to 51.4 in July from 48.8 in June, data released by the Institute for Supply Management (ISM) showed Monday. 

Apart from a possible emergency Fed rate cut. Investors expect the European Central Bank (ECB) to reduce interest rates by 0.5 percentage points at its next meeting in September. The Eurozone Retail Sales on Tuesday might offer some hints about the economic condition in the Eurozone and the path of the ECB rate cut. In case of the stronger-than-expected readings, this could lift the Euro (EUR) against the USD.

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