While the euro is experiencing a rather deep and significant correction, consumers in the Eurozone are in no hurry to open their wallets, prompting some experts to wonder if the economic recovery, widely anticipated by representatives of the European Central Bank, will ever come.

Growth in the 20-nation bloc, which outperformed in the first half of this year, is gradually slowing down. Production remains declining, households cannot compensate for the downturn, and sentiment has fallen below pre-pandemic levels.

Even though inflation is now approaching 2%, some ECB officials see many challenges that the economy will face in the near future, further advocating for policy easing. Thus, we may see another easing in borrowing costs in a few days. If economic weakness persists into 2025 and inflation falls below the target, a more radical monetary policy easing may be required. Sluggish growth seems to have become a growing concern for the ECB lately, and weak consumption is direct evidence of this.

On paper, everything necessary to recover consumer demand is in place: inflation has already fallen to 2.2% from a peak of 10.6%, unemployment is at a record low, incomes are rising faster than prices and lower borrowing costs will make mortgage loans cheaper. Once the population realizes that inflation has significantly decreased and interest rates start to drop quickly, a rise in consumer spending is likely not far off. However, despite these factors, spending remains very restrained, and winter has always been a poor time to ramp it up. According to the latest data, household consumption fell by 0.1% in the second quarter.

In Germany, the largest of the 20 eurozone economies, consumption fell even more sharply over the same period. Volkswagen AG's latest announcement last week that it might shut down plants in its domestic market for the first time in its 87-year history also does not add confidence in the future.

A number of economists note that even for the region as a whole, consumption appears to be a weak spot, challenging the ECB's forecast of 0.9% GDP growth this year. The latest retail sales data missed expectations, increasing by only 0.1%, with anticipated nominal spending at the lowest level since February 2022.

In addition to interest rate cuts, the ECB meeting is expected to include downward revisions to forecasts for this year's economic growth rates. This is another reason why the euro has been actively losing ground against the US dollar lately. Downward-revised forecasts will also increase the likelihood of an October rate cut in addition to the cuts in September and December, which investors are already fully pricing in.

As for the current technical picture of EUR/USD, buyers need to think about taking the 1.1050 level. Only this will allow them to aim for a test of 1.1070. From there, it is possible to climb to 1.1090, but it will be quite problematic to do it without support from the big players. The furthest target is a peak at 1.1120. If the trading instrument falls to around 1.1030, I expect any significant actions from big buyers. If no one is there, it would be wise to wait for a test of the 1.1008 low or to open long positions from 1.0980.

As for the current technical picture of GBP/USD, pound buyers need to take the nearest resistance at 1.3100. Only this will allow them to aim for 1.3140, above which it will be quite problematic to break through. The furthest target is the area at 1.3170, after which one can talk about a sharper upward breakout of the pound to 1.3190. If the pair falls, bears will attempt to take control over 1.3060. If successful, breaking through this range will deal a serious blow to the bulls' positions and push GBP/USD to the 1.3030 low with the prospect of reaching 1.3010.