Euro Drops Against US Dollar on Weak Eurozone Retail Sales Data

The euro today gave up all its gains and traded much lower after the release of weak Eurozone retail sales data in the mid-European session. The euro had rallied to new daily highs following the release of positive Eurozone services PMIs by IHS Markit earlier in the session.

The EUR/USD currency pair lost over 60 points to decline from a high of 1.2475 to a low of 1.2407 at the time of writing.

The euro’s steady decline was precipitated by the release of the Eurozone retail sales data for December by Eurostat. The EU retail sales declined by 1.0% in December to come in at an annualized 1.9%; both prints were in line with expectations. The single currency’s initial rally was triggered by the positive Markit Eurozone Services PMI, which came in at 58.0 versus the expected 57.6. The Markit Germany Services PMI also exceeded expectations coming in at 57.3 as compared to the consensus estimate of 57.0. The Markit Italy Services PMI was also higher than expected, which also contributed to the pair’s initial rally.

The uptick in demand for the US dollar was also responsible for the currency pair’s decline despite the sharp retracement in US Treasury bond yields. The ongoing political talks in Germany between Angela Merkel‘s CDU and the Social Democrats, might have also contributed to the pair’s decline.

The currency pair’s short-term performance is likely to be affected by the ECB President Mario Draghi‘s testimony before the EU parliament scheduled for later today.

The EUR/USD currency pair was trading at 1.2406 as at 14:49 GMT having dropped from a daily high of 1.2475. The EUR/JPY currency pair was trading at 136.48 having declined from a high of 137.11.

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