German Retail Sales Unexpectedly Fall by 0.4% in January, Another Red Flag

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

German Retail Sales Falls Again

German retail sales unexpectedly fell by 0.4% month-on-month in January after sliding by 1.6% in December. Economists forecast retail sales to increase by 0.5% month-on-month.

According to Destatis,

• Food retail sales increased by 1.1% in January 2024.
• Sales of non-food retail products stalled in January 2024.
• Compared with January 2023, retail sales were down 1.4%.

ECB Monetary Policy Impact Analysis

The retail sales figures will unlikely influence investor bets on an April ECB rate cut. German retail sales have weakened since June 2023.

Later today, German unemployment and inflation numbers need consideration. The inflation numbers will likely impact bets on an April ECB rate cut. Economists forecast the German annual inflation rate to fall from 2.9% to 2.6%. Softer-than-expected inflation numbers and a deteriorating labor market could fuel bets on an April rate cut.

EUR/USD Reaction to German Retail Sales

Before the German retail sales report, the EUR/USD rose to a high of $1.08403 before falling to a low of $1.08279.

In response to the retail sales data, the EUR/USD fell to a low of $1.08302 before rising to a high of $1.08379.

On Thursday, the EUR/USD was down 0.02% to $1.08361.

Up Next

From the US, the Personal Income and Outlays Report will put the Fed in the spotlight. The market focus will likely be on Core PCE Price Index numbers. Economists forecast the Core PCE Price Index to increase by 2.8% year-on-year in January. The Core PCE Price Index rose by 2.9% year-on-year in December.

Other components of the Report include personal income and spending figures that need consideration. Upward trends in personal income and spending may fuel demand-driven inflation.

With inflation in focus, FOMC member speeches also need monitoring. FOMC members Raphael Bostic, Austan Goolsbee, Loretta Mester, and Fed Vice Chair John Williams are on the calendar to speak. Reactions to the inflation numbers need consideration.

Other US stats include Chicago PMI, initial jobless claims, and pending home sales. However, these will likely play second fiddle to the Personal Income and Outlays Report.