The Euro to US Dollar (EUR/USD) exchange slumped to a 1-month low of 1.11 on Tuesday, as investors grew jittery ahead of Thursday’s European Central Bank (ECB) policy meeting and overshadowed the release of positive economic data from Spain and Germany.
Data released early in the session showed that German retail sales rose strongly in January and smashed economist forecasts. The data compiled by the Federal Statistics Office showed that on a month-on-month basis, retail sales surged by 2.9% and on an annual basis soared by 5.3%. Economists had been expecting a monthly figure of just 0.4% and an annual figure of 2.7%.
The sale of food, tobacco and beverages increased by 3.8% on an annual basis, and non-food items rose by 6.3%. Sales made via the internet also soared by 14% year-on-year.
The data adds to signs that the Eurozone’s largest economy is strengthening and confirms the most recent consumer confidence survey. According to Market research firm GfK, consumer sentiment is set to rise to 9.7 this week, the highest level seen since October 2001.
Hot on the heels of the German data was a report out of Spain, which showed that the number of Spaniards out of work fell by 13,538 or 0.3% in February. The nation’s construction sector was shown to have created the most jobs.
Today’s figures show that the number of unemployed was down by 300,333 people, or 6.24% in February from a year earlier.
The Euro’s gains because of the reports out of Spain and Germany were short-lived however, as the Eurozone’s Producer Price Index (PPI) data fell more than forecast to its lowest level since November 2009. The Producer Price Index declined by 3.4% on a yearly basis, and fell by -0.9% month-on-month.
As the session progressed, the Euro softened as investor attention focused on the ECB meeting due to be held on Thursday. The markets are jittery as they await the launch of the bank’s €60 billion a month bond buying programme.
In addition, putting pressure on the single currency was the publication of a report showing that 38% of investors surveyed by the German research group Sentix believe that a member of the Eurozone will leave it over the next 12-months. The Euro Break-up Index rose to its highest level in two years due to concerns over Greece.
The US Dollar could make further gains on Wednesday if the latest ADP Employment data comes in strongly.
The Euro to US Dollar exchange rate was trading in the region of 1.119.