Paris, France. Film screening room. Image source: ©Brunogiu © 123RF.com
Eurozone's retail sales took a sharp dive in February, which exacerbates the economic woes for the Euro Area. According to Eurostat's findings from earlier today, retail sales plummeted by 5.9 per cent over the previous month.
This contraction underpins an abrupt U-turn from January's 1.8 per cent growth in retail sales, missing the preliminary market forecasts for a more moderate contraction of only 1.4 per cent.
Euro Area Retail Sales. Image source: TradingEconomics.com
While it is not uncommon for consumer demand to wane in February following the seasonal upsurge in spending over the December-January period, last month's comparatively large downturn underlines increasingly more volatile discrepancies in consumer sentiment.
As can be seen in the above graph, recovery was more even during last year's third quarter. During the last two quarters, however, consumer sentiment became more polarised, leading to these volatile outbursts on a monthly basis.
A growing retail sector needs to be supported by rising sales to realise ECB's price stability goals. In other words, inflation would remain subdued in the Euro Area for as long as consumer sentiment remains muted, which translates to weak retail sales.
As a consequence of today's poor retail sales numbers, the euro is likely to continue being strained in the short-term. Meanwhile, the greenback could be further bolstered tomorrow due to the expectations for robust employment data for February.
As can be seen on the 2H chart below, the EURUSD continues to depreciate within the borders of a descending channel. The price action recently rebounded from the upper limit of the channel, which coincided with the 50-day MA (in green).
While the underlying sentiment continues to look positively bearish-oriented, there are reasons to anticipate some bullish resistance in the immediate future. Namely, the price action appears to be consolidating above the major support level at 1.20300, creating a bottleneck with the channel's nearing upper edge.
EURUSD 2H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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