By DailyFX – The biggest economic surprise of last week was the sudden drop in
German Retail Sales which collapsed -1.4% from 0.8% expected, It… … turns
out that this bit of news was foreshadowing further weakness ahead as
the slew of Euro-zone data released tonight confirmed a softening in
European consumer demand. The EU Retail PMI numbers slipped below the 50
boom/bust for the first time in four months after reaching a two year
high just the month prior. Higher oil costs and an unstable employment
situation continued to weigh on the psyche of EU consumers, and Mr.
Trichet's hawkish comments notwithstanding should the slowdown
persist it would put enormous pressure on ECB to hold off on the March
hike. As we wrote in our weekly piece, “the message of last week's
data is that export growth can only take the EZ so far. Until the
region develops some organic consumer demand, the recovery is likely to
be sluggish and so will any rally in the EUR/USD. “

As result, the EUR/USD broke the 1.2000 figure once again and was
coming perilously close to the 1.1950 support in early European trade
today. With the US economic calendar barren until Friday's Trade
Balance report and most of the key EZ data, with the exception of German
Industrial Production already out of the way, trading may be influenced
by to geo-political of ECB-speak risks for the rest of the week.

By DailyFX