- Jennifer Lee, a senior economist at BMO Capital Markets
It seems that it will be extremely difficult now to stop the depreciation of the most traded currency pair following last week's ECB's press conference. The reaction at disappointing ZEW economic sentiment from Germany was unusually strong, and even weak retail sales from the world's largest economy were not able to limit pair's depreciation.
Usually, retail sales data has a strong impact on markets, as it is a primary gauge of consumer spending, which accounts for a majority of the overall economic activity. Therefore, any slowdown in spending will immediately trigger concerns about the economic growth. On Tuesday, the Commerce Department said that seasonally-adjusted sales at American retailers climbed just 0.1% in April, slowing from a 1.5% solid gain a month earlier, following harsh winter that had curtailed shopping. The main downside pressure came from weak auto sales, which edged only 0.6% over the corresponding period, after posting a 3.6% surge in the previous month. While stronger readings for March and February forced analysts to upgrade their gross domestic product forecasts, the unexpected moderation in sales in April will definitely be taken with a grain of salt. Last month's reading will soften hopes for a second-quarter rebound in the economy after it has almost stalled in the first three months.
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