The EUR/USD has continued to sell-off as incoming economic data reveals further weakness in the Eurozone economy. Not only did Deutsche Bank, Germany's largest bank, report its first loss in 5 years, but the Bloomberg Eurozone Retail PMI index hit a record low. Sales fell across all 3 of the largest euro member states with consumer spending in Italy reporting the biggest dip. Sales in Germany and France are both in contractionary levels.
Despite higher food prices, sales of food and drinks fell by the fastest rate in more than 2 years. This suggests that retail sales across the region will see a similar decline. Fundamentals, technicals and sentiment all support further losses in the Euro. The one thing that could have triggered a meaningful turn in the single currency was reasons for the European Central Bank to cut interest rates.
If economic data deteriorates even further, the central bank may have to seriously consider this possibility. The futures market currently does not expect an interest rate cut until the end of this year at the earliest. Anything to suggest otherwise could cause more volatility in the Euro. German unemployment is due tomorrow and we expect the employment numbers to be Euro negative.
Despite higher food prices, sales of food and drinks fell by the fastest rate in more than 2 years. This suggests that retail sales across the region will see a similar decline. Fundamentals, technicals and sentiment all support further losses in the Euro. The one thing that could have triggered a meaningful turn in the single currency was reasons for the European Central Bank to cut interest rates.
If economic data deteriorates even further, the central bank may have to seriously consider this possibility. The futures market currently does not expect an interest rate cut until the end of this year at the earliest. Anything to suggest otherwise could cause more volatility in the Euro. German unemployment is due tomorrow and we expect the employment numbers to be Euro negative.