Eurozone retail sales posted a modest annual increase of 1.5% in January, falling short of the anticipated 1.9%, according to data released by Eurostat. Monthly figures showed a slight decline of 0.3% compared to the previous month. These results have set the stage for the European Central Bank's (ECB) upcoming interest rate decision, which will be announced on Thursday at 13:15 GMT. The ECB is expected to reduce the benchmark rate on its deposit facility by 25 basis points, from 2.75% to 2.5%, following its March policy meeting.
The lackluster retail sales data has contributed to a cautious market sentiment, impacting currency trading across the region. The EUR/USD pair experienced a minor increase of 0.09%, trading at 1.0798. Meanwhile, the GBP/USD returned to the red, trading below 1.2900 during the European session on Thursday. The Euro's performance remains influenced by concerns over the U.S. Dollar, which continues to consolidate weekly losses amid apprehensions about an economic slowdown triggered by tariffs implemented during Trump's administration.
In December, Eurostat had revised the Eurozone's retail sales growth to 2.2%, highlighting a more robust performance in the final month of the previous year. However, January's figures indicate a deceleration in consumer spending at the start of 2023. As the ECB prepares to announce its monetary policy decision, market participants are closely watching for any indications of future economic directions.
The upcoming rate cut by the ECB aligns with its continued efforts to stimulate economic growth within the Eurozone. By lowering the deposit facility rate, the central bank aims to encourage lending and investment activities, thereby fostering economic expansion. Analysts suggest that this move reflects the ECB's cautious approach in navigating the current economic landscape.
The market's response to these developments remains uncertain, with fluctuating currency values showcasing investor apprehension. While the EUR/USD pair experienced a slight uptick, broader concerns about global trade tensions and economic uncertainties continue to weigh on market sentiment.