German Retails Sales Skyrocket but EUR/USD Muted

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German Retail Sales registered their largest monthly gain in six years rising 3.1% in January versus expectations of 0.9%. In the month prior Retail Sales fell sharply by 2.1%. Overall sales were up an impressive 2.4% on a over year basis.

The surprisingly strong rebound in consumer demand dovetails with recent improvement in business sentiment and suggest that Europe’s largest economy may be on its way to recovery in Q1 of this year. In contrast to the rest of the EZ, German labor demand has been solid as unemployment remains at a two year low and it is clearly translating into stronger consumer spending which should fuel GDP growth this quarter.

The EUR/USD saw little reaction to news however with the pair trading in a tight 1.3050-1.3090 range for most of Asia and early European trade as currency markets remained cautious keeping one eye on Italy, where there has been no progress so far in the wake of Monday’s election that resulted in a stalemate.

The latest economic news from Italy was dour as well with unemployment rate increasing to 11.7% from 11.1% expected. The increase in Italian rate my pull the overall EZ unemployment rate higher when its is released at 10GMT later today.

For now the EUR/USD remains in a quiet consolidation phase trading between 1.3050-1.3100 as markets await progress from Rome.

Boris Schlossberg
Managing Director

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