Soft German Retail Sales sends euro lower

The euro is down for a second straight day. In the North American session, EUR/USD is trading at 1.2180, down 0.28% on the day.

Germany Retail Sales slides

German consumers held tightly on the purse strings in April, as Retail Sales fell by 5.5% (MoM). This slide was much worse than the estimate of -2.0% and was a sharp downturn from the previous read of +7.7%.

On an annual basis, Retail Sales looked better, with a gain of 4.4%. Still, this missed the consensus of 10.1% and the gain is somewhat deceptive, as it is in comparison with Retail Sales from a year ago, at the height of the corona pandemic.

We’ll get a look at eurozone retail sales for April on Friday. Like in Germany, the eurozone is expected to have contracted in Q1, with a consensus of -1.2% m/m. However, on an annualised basis, the forecast stands at 25.5%, as consumer spending is projected to have surged since the dark days of Covid in 2020.

With major economies reopening, inflation has become a buzzword that investors and central banks are paying very close attention. In the US, a surge in April CPI provided the US dollar with a brief boost. In the eurozone, inflation is also on the move. CPI flash inflation hit 2.0% y/y in May. This was higher than the 1.6% y/y in April and the highest level in 2018. Core inflation rose to 0.9% y/y in May, up from 0.7% previously.

Although these inflation figures are higher, the ECB, similar to the Fed, is likely to stick to its well-rehearsed script that higher inflation is transient. This means that the ECB is unlikely to adjust its inflation forecast at next week’s policy meeting.

.

EUR/USD Technical

• EUR/USD faces resistance at 1.2260. Above, there is resistance at 1.2329
• On the downside, there is support at 1.2127, followed by 1.2063

For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-event

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.