Despite weak growth and inflation data for December, EUR bulls were boosted this week as the Eurozone retail sales print came in better than expected for November. Retail sales rose 1.1% over the month, year on year. Despite marking a decline from October’s 2.3% reading, they came in well above the forecast 0.4% increase.
The increase comes despite the trail off in consumer confidence which continues to decline despite an improvement in conditions for Eurozone consumers, mainly linked to lower oil prices and higher wage growth which has raised the disposable income profile for many.
While the data is positive, the outlook for household consumption is still weighed upon by factors such as ongoing uncertainty surrounding Brexit as well as the downward revisions to Eurozone growth and inflation.
However, if disposable incomes grow this could well prove to foster the conditions for renewed growth, putting momentum back into the Eurozone economy and keeping the ECB on course to raise rates in H2.
The longer-term picture in EURUSD shows price continuing to hold support at the 1.1298 level which keeps the prospect of a large ABCD pattern in play, suggesting an eventual move up towards the 1.3436 level, with the 50% retracement from 2008 highs coming in just below.