Forex News: Euro Drops Below 1.31 as Retail Sales Disappoint
THE TAKEAWAY: Euro-zone retail sales decline 1.2% in October, worse than expected -> Lower sales possibly suggest a contraction in Q4 economy -> Euro remains below 1.3100
Euro-zone retail sales decline by the sharpest rate in 6-months in October. Sales were down 1.2%, worse than the expected 0.2% drop in retail sales, and lower than September’s revised 0.6% decline. Retail sales declined by 3.6% when compared to October 2011, according to Eurostat.
The sales of food, drinks, and tobacco declined by 0.8% in October; non-food sales declined by 1.4%. Finland saw the largest decline in retail sales, down 3.0%, and Germany saw a 2.8% decline in sales. Ireland saw the biggest increase in retail sales, up 1.9%.
The Euro-zone entered a technical recession when the economy contracted for two straight quarters. Euro investors are looking for signs of a return to growth in Q4, and between the lower retail sales and today’s report of the 10th straight month of declining composite output, it seems like there is a smaller chance of returning to growth.
The Euro declined slightly below the release of the disappointing retail sales, as a Spanish bond sale dissapointed expectations. EURUSD is trading back below 1.3100 in forex markets. Resistance could be provided by a 2-month high at 1.3139, and support could be provided at 1.3026, by the 76.4% retracement of the drop from October’s high to November’s low.
EURUSD Daily: December 5, 2012