The euro continues to experience problems with growth against the dollar, and inflation data, which many expected this morning, did not come as a surprise. The scenario with profit-taking on short positions in risky assets will still be played at the end of the month at the North American session.
The data on the sharp drop in retail sales in Germany is unlikely to please economists and traders, which once again confirms the need for intervention by the European Central Bank.
The preliminary consumer price index (CPI) in France in August this year was slightly better than economists’ forecasts and grew by 0.5% compared to July and 1.1% year-on-year. Analysts had expected growth of only 0.4%. The harmonized consumer price index in France in August grew by only 1.2% compared with August 2018, after rising by 1.3% in July.
Inflation data in Italy also pleased the traders. The report indicated that consumer prices rose in August by 0.5% after zero in July. Compared to August 2018, growth also amounted to 0.5%. Economists had expected less active growth of 0.2% and 0.2%, respectively.
The European Central Bank pays special attention to inflation, as it makes decisions on monetary policy based on it. Thus, the report of the statistics agency indicated that the preliminary consumer price index (CPI) of the eurozone in August rose by only 1.0%, which fully coincided with the forecasts of economists. Growth was also just 1.0% in July, well below the ECB’s target of 2.0%. This is further evidence that the European regulator can easily return to the stimulus program of the economy, which will not lead to a sharp inflationary jump.
As for the base index, which does not take into account volatile categories, the eurozone consumer price inflation in August rose by 0.9% compared to August 2018.
Unemployment data in the eurozone were ignored by traders, as they did not lead to serious changes in the market. The unemployment rate coincided with economists’ forecasts and remains unchanged at 7.5% in July, as in June.
As noted above, the fall in German retail sales in July was more significant than expected, which was another negative signal for the economy.
According to the Federal Bureau of Statistics, retail sales in Germany in July fell by 2.2% compared to the previous month, while economists had predicted a decline in sales by 1.0%. Compared to the same period of the previous year, retail sales increased by 4.4%.
The fall in retail sales and problems in foreign trade due to the decline in exports is direct evidence that Germany is unlikely to avoid a technical recession in the 3rd quarter of this year. Let me remind you that according to the latest report, GDP in the 2nd quarter of this year decreased by 0.1% compared to the previous quarter.
As for the technical picture of the EURUSD pair, the pressure on the euro will gradually slow down by the end of the week, and traders will hurry to fix profits. The maximum that sellers of risky assets can expect today is a support update of 1.1020, which may occur after the release of a weak report on the eurozone consumer price index. If buyers can regain the level of 1.1060, which was missed yesterday, a larger growth of the trading instrument in the area of 1.1090 is not excluded.