Eurozone Retail Sales contract more-than-expected: What weak Retail Sales mean for EUR/USD
The latest Eurozone retail sales data showcased a sharper contraction than anticipated, raising concerns over deflation and complicating the ECB's policy stance. This broader economic weakness is likely to reinforce expectations of a pause in rate hikes from the central bank, favoring the USD against the EUR in the near term. With the current EUR/USD spot at 1.1500, the data underscores the divergence in economic momentum that could drive the pair closer to the median consensus target of 1.1700 over the next few months.
Where it sits in our coverage
Our consensus EUR/USD target is currently at 1.1700 (median across firms), with notable divergence in targets; Goldman forecasts 1.1800, while Citi is positioned lower at 1.1300. This positions the market to react to weakness in economic data that could challenge EUR strength.
How firms align
Firms like JPMorgan and MUFG maintain more optimistic forecasts at 1.1800 and 1.2100 respectively for Mar26, aligning with expectations that the EUR could regain some strength if conditions improve. Conversely, Citi's more cautious stance at 1.1300 for the same tenor suggests a bearish outlook that contrasts with the broader view.
What the data shows
The recent retail sales contraction reinforces our previous insights on the ECB’s rate path. As highlighted in our research, the EUR/USD is trading notably below longer-term consensus estimates of 1.20, with today's figures likely pushing the market to reassess future trajectories as reflected in /research/eurusd-ecb-rate-path.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Eurozone retail sales contraction reinforces bearish sentiment for EUR/USD.
- 02Expect potential for EUR/USD to test resistance near 1.1700 following this release.
- 03Deflation concerns could lead the market to a significant risk-off shift, impacting positions.
Market implications
Traders should pay close attention to upcoming Eurozone economic indicators, particularly inflation and employment data, as these could further define the path for EUR/USD. A break below 1.1500 could signal deeper bearish momentum and reorient consensus levels.
Risks to this view
A shift in ECB policy, particularly any hints of a hawkish turn or surprising strength in economic data, could quickly invalidate the bearish outlook, driving EUR/USD higher toward consensus levels. Additionally, geopolitical factors could also introduce volatility.
Sentiment by currency
USD+EUR-JPY~GBP~Composite USD score: +0.55
Sources & References
How we cover this story
Other coverage on this pair
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FX Daily: Iran fall-out coming home to roost in EUR/USD
https://think.ing.com/articles/fx-daily-iran-fall-out-coming-home-to-roost-in-eur-usd/
FX Daily: Iran fall-out coming home to roost in EUR/USD
https://think.ing.com/articles/fx-daily-iran-fall-out-coming-home-to-roost-in-eur-usd/
FX Daily: Iran fall-out coming home to roost in EUR/USD
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