Eurozone Retail Sales Disappoint to Test Market Optimism

It is a busy day ahead for the EUR/USD. Early in the European session, the German economy was in the spotlight, with factory orders for December in focus ahead of Eurozone retail sales figures. Partially reversing a 4.4% decline from November, orders increased by 3.2% versus a forecasted 2.0%.

Construction PMI numbers for Italy, Germany, France, and the Eurozone also showed improving trends. In January, the IHS S&P Global Construction PMI for the Eurozone increased from 42.6 to 46.1. All three member states registered less marked contractions in January.

In a busy morning session, the Sentix Investor Confidence Index also signaled improving market conditions. The Index increased from -17.5 to -8.0 versus a forecasted -12.8.

However, retail sales figures for the Eurozone drew more interest this morning. In December, retail sales fell by 2.7% versus a forecasted 2.5% slide. Retail sales increased by 1.2% in November.

According to Eurostat,

• Food, drink, & tobacco sales slid by 2.9%, with non-food product sales declining by 2.6%.
• However, automotive fuel sales increased by 2.3%.
• The Netherlands (-6.3%), Germany (-5.3%), and Luxembourg (-3.8%) recorded the largest monthly declines in retail trade volume.
• Slovakia (+2.3%) and Austria (+1.6%) recorded the largest increases.
• Year-over-year, the volume of retail trade declined by 2.8%.
• The volume of retail trade fell by 6.9% for food, drink, & tobacco and by 0.6% for non-food products while rising by 6.0% for automotive fuels.

While the numbers were disappointing, they are unlikely to deter the ECB from pushing ahead with its near-term policy goals.

EUR/USD Price Action in Response to Euro Area Retail Sales

Ahead of today’s retail sales figures, the EUR/USD rose $1.07991 before falling to a low of $1.07690.

However, in response to the retail sales figures the EUR/USD fell to a session low of $1.07632 before steadying.

At the time of writing, the EUR was down 0.24% to $1.07677.

Up Next

Investors do need to consider ECB member speeches. ECB President Lagarde will attend a meeting with European Council President Charles Michel, European Commission President Ursula von der Leyen, Eurogroup President Paschal Donohoe, and EIB President Werner Hoyer.

However, it is a quiet day on the US economic calendar. There are no US economic indicators to guide investors. The lack of stats will leave the markets to consider last week’s stats and any FOMC member chatter.

FOMC member reaction to the January Jobs Report would move the dial.