- Eurozone retail sales decline by 2.9%
The euro is down on Wednesday, after a two-day losing streak. In the European session, EUR/USD is trading at 1.0675, down 0.23%.
Eurozone retail sales slide
The eurozone economy has been sputtering, so it’s no wonder that consumers are in a sour mood and holding tight on the purse strings. Eurozone retail sales slowed to -2.9% y/y in September, down from a revised -1.8% in August and just above the market consensus of -3.1%. This marked a twelfth straight month of decline, pointing to prolonged weakness in consumer demand, as consumers have been squeezed by high prices and elevated borrowing costs. On a monthly basis, retail sales declined by 0.3%, compared to -0.7% in August and below the market consensus of -0.2%.
Germany, the largest economy in the eurozone, continues to reel off soft numbers. On Tuesday, Industrial Production declined by 1.4%, and the most recent service and manufacturing PMIs were below 50, which points to contraction.
US exceptionalism has boosted the US dollar in recent months, and the euro has been steamrolled, falling as much as 9.5% since July. The US dollar has run into some headwinds since Friday’s soft nonfarm payrolls, but the US economy remains strong and the Fed isn’t likely to trim rates anytime soon. This means that the euro will be hard-pressed to keep pace with the greenback, barring a strong recovery in the eurozone.
Fed Chair Powell delivers public remarks later today and the markets will be all ears. Powell has tried to sound hawkish as he battles to bring inflation back down to the 2% target. The Fed has stuck to its “higher for longer” stance on interest rates, but the markets are increasingly convinced that the Fed has wrapped up its rate-tightening cycle. The soft nonfarm payrolls report on Friday provided support for the view that rates have peaked.
EUR/USD Technical
- There is resistance at 1.0727 and 1.0813
- EUR/USD continues to test support at 1.0665. Below, there is support at 1.0583
