German Retail Sales Drops 1.5% While the EUR/USD Await Euro Area Inflation Data
Significantly, the weak October retail sales figures came after Germany’s GfK Consumer Climate Report, which signaled a sharp pullback in private consumption. The report highlighted tumbling income expectations and rising consumers’ willingness to save, driven by concerns about a weaker labor market.
The latest retail sales and consumer sentiment figures paint a gloomier picture of the German economy.
Impact on ECB Monetary Policy
The sharp decline in retail sales and potential for steeper falls in November may fuel speculation about a 50-basis point December ECB rate cut. Deteriorating consumer spending may dampen demand-driven inflation, supporting a more dovish ECB rate path.
However, November’s German inflation figures could temper expectations for a 50-basis point December rate cut. The annual inflation rate increased from 2.0% in October to 2.2% in November, exceeding the ECB’s 2% target. This may empower the hawks to combat calls for a 50-bps rate cut despite weak private sector PMIs, retail sales, and consumer sentiment figures.
The mixed signals will put greater emphasis on the Eurozone’s inflation data.
This article was originally published by a www.fxempire.com
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