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German Retail Sales and Euro Area CPI

We start the week with some soft data that should pressure the EUR, maybe not against the USD, but against the GBP. 

German Retail Sales (m/m, May): -0.6%
Forecast: 0.8%
Previous: -1.5%

This marks 3 consecutive months of contraction in retail sales. On the year,  May's retail sales was up 1.9% in real terms and 2.2% in nominal terms. Although we are not seeing any significant problems in German growth, the tepid pace shown in 2014 so far in retail sales weighs on the ECB to impose further monetary stimulus. The inflation data we got for June also gives room for the ECB to act.

CPI Flash estimate (y/y, June): 0.5%
Forecast: 0.6%
Previous 0.5%


With the annualized inflation rate way below the 2.0% target, the ECB has room to impose QE. Draghi has stated that inflation should have bottomed and should pick up in the second half of the year. So far, we have not seen any rebound, but the 0.5% is the lowest since Nov. 2009. If the annual rate goes below 0.5%, it would likely prompt Draghi and the ECB to act. A rise above 0.7% would finally show some bottoming in Euro Area's inflation rate.