The euro experienced a slight decline against the dollar, trading just below $1.16, as investors processed a mixed bag of economic data from the Eurozone. German retail sales disappointed, pointing to continued weakness in domestic demand. Eurozone inflation figures presented a varied picture, with some countries seeing unchanged or lower-than-expected inflation while others saw increases. The data, alongside European Central Bank commentary, solidified market expectations of no rate cuts until 2026.
- The euro edged slightly below $1.16.
- German retail sales fell 0.3% in October, missing expectations.
- German inflation was unchanged at 2.3% in November.
- The EU-harmonized inflation rate accelerated to 2.6%, the highest since February.
- Inflation in France and Italy remained steady and below forecasts.
- Spain’s inflation rate eased less than anticipated.
- Market expectations remain unchanged, projecting no ECB rate adjustments through 2026.
The confluence of underwhelming retail performance, varied inflation data across the Eurozone, and the perceived reluctance of the central bank to adjust interest rates suggests a period of continued uncertainty for the euro. The currency’s strength is likely to be limited by the region’s economic headwinds and the lack of anticipated monetary policy easing, particularly as other major economies consider potential rate cuts.