German Retail Sales Tumble 1.9% in February Driving ECB Rate Cut Bets

On Thursday, the German economy was in the spotlight. German retail sales garnered investor interest early in the European session.

German Retail Sales

In Germany, retail sales declined by 1.9% month-on-month in February after falling 0.4% in January. Economists forecast retail sales to advance by 0.3%.

According to Destatis,

• Food retail sales slid by 1.7% in February 2024.
• Non-food retail product sales declined by 1.0% in February 2024.
• Internet and mail order sales tumbled 2.8%.

ECB Monetary Policy Impact Analysis

The retail sales figures will likely fuel investor expectations of a June ECB rate cut. German retail sales were down 2.7% year-on-year in February. In January, German retail sales were down 1.4% year-on-year. Downward trends in consumer spending dampen demand-driven inflationary pressures.

However, wage growth also remains an ECB focal point.

Later this morning, German unemployment data warrants investor consideration. ECB Executive Board members have voiced confidence about wage growth easing, supporting a June interest rate cut. A deteriorating German labor market could align with ECB expectations of softer wage growth trends.

Economists forecast German unemployment to increase from 2.713 million to 2.733 million in March.

EUR/USD Reaction to German Retail Sales

Before the German retail sales report, the EUR/USD fell from $1.08278 to a low of $1.08078.

Reacting to the retail sales data, the EUR/USD rose to a high of $1.08185 before falling to a low of $1.08149.

On Thursday, the EUR/USD was 0.10% to $1.08171.

Up Next

Later today, finalized GDP and Michigan Consumer sentiment numbers will draw investor attention. According to preliminary numbers, the US economy grew 3.2% quarter-on-quarter in Q4. The Michigan Consumer Sentiment Index declined from 76.9 to 76.5 in March.

Other stats include US jobless claims, pending home sales, and the Chicago PMI.

While the numbers will garner investor interest, the US Core PCE Price Index could be pivotal for investor bets on an H1 2024 Fed rate cut. The inflation numbers are out on Friday (March 29).

Beyond the numbers, investors must track FOMC member commentary. Recent speakers have fueled uncertainty about a June Fed rate cut. On Thursday (March 28), FOMC member Christopher Waller warned about the risks of cutting rates too early, testing bets on a June rate cut.