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EURUSD: Retail sales in the 17 member euro area fell 0.6 percent in December after falling a revised 0.3 percent the month prior amid economists' expectations of 0.5 percent. At the same time, the annualized rate tumbled 0.9 percent. Looking ahead, sales may remain under pressure in the coming months due to the increase in the value added tax measures and tough austerity measures by governments in the bloc in order to battle their high budget debts. Not to overlook, poor weather conditions may also put downward pressure on retail sales in the near term.
Indeed, the currency markets showed a muted response to the dismal retail sales release as market participants shift their focus to the ECB rate decision which will be released at 12:45 GMT. As the central bank is widely expected to keep their key overnight lending rate unchanged at 1.00 percent, comments subsequent to the decision will likely dictate price action. Following last meeting's hawkish tone by the central bank head, I do not rule out further upbeat comments from Jean-Claude Trichet as inflation advanced to a two year high of 2.4 percent in January. Mr. Trichet is expected to reiterate that while current rates remain appropriate, the risk of higher consumer prices may push to the upside. Join me to cover this event live!
Written by Michael Wright, Currency Analyst
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Michael Wright is the author of FX Headlines, Fundamentals vs. Technical's, Weekly Spotlight, and Forex Trading Weekly Forecast