Forex News – Euro drops after German retails sales unexpectedly decline

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German retail sales data disappointed markets today by falling more than expected, the main driver behind the increase is the sharp rise in oil prices which are fueling inflation.

Germany’s Federal Statistics Office released data for the monthly seasonally-adjusted retail sales for the month of January, which showed a reading of a 1.6 percent decrease which followed a 0.1 percent  increase in December. This was far below analysts’ expectations of a 0.3 percent rise.

The yearly data showed retail sales up 1.6 percent in January in inflation-adjusted terms and 3.5 percent  in nominal terms.

The euro zone debt crisis is hampering growth across the whole euro region, trickling from the peripherals to the core of the euro area. The stalled growth is affecting Germany’s export market, which is within the euro area, its largest export market. Also higher energy costs pushed inflation to 2.5 percent last month.

However, the bright side is that unemployment is hovering at a two-decade low and recent data suggest the country may avoid a recession. Germany’s GfK consumer research group reported earlier this week that a persistently strong labor market made consumers more upbeat about income expectations in February.

Today’s retail sales data put pressure in the euro. EURUSD fell from 1.3301 before the data to 1.3272 within 30 minutes of the data.