News & analysis

The euro fell against the dollar this morning after reaching a 10-day high overnight, as French retail sales plunged 24% month-on-month according to data from the Bank of France. The negative data shock came prior to the scheduled inflation data releases from major eurozone economies and the IEA report that showed a collapse in oil demand, causing WTI prices to slump. 

Please find the details of the CPI releases below:

  •         France CPI month-on-month: 0.1% compared to the 0.0% consensus and prior reading.
  •         France CPI year-on-year: 0.7% compared to the 0.6% consensus and prior reading.
  •         France CPI EU Harmonised month-on-month: 0.1% compared to the 0.0% consensus and prior reading.


  •         Spain CPI month-on-month: -0.4% compared to the -0.3% consensus and prior reading.
  •         Spain CPI year-on-year: 0.0% compared to the 0.1% consensus and prior reading.
  •         Spain CPI EU Harmonised month-on-month: 0.6% compared to the 0.7% consensus and prior reading.


  •         Italy  CPI EU Harmonised month-on-month: 2.2% compared to the prior reading of -0.5%. No consensus was available for this release.
  •         Italy CPI month-to-month: 0.1%, similar to the prior reading. No consensus was available for this release.


EURUSD continued to weaken as the data were released, but the weakening may be attributed to other factors than the inflation data itself. The eurozone has seen many disappointing data releases since nationwide lockdowns were imposed, which is to be expected, but the currency has not always responded to the negative data prints. Arguably, much of the economic damage of the current pandemic has already been priced into assets such as the euro over the course of the last month due to the proactive nature of financial markets.

A bounceback in the dollar caused by a slide in crude markets and a reappearing risk-off mood in markets is likely to have played a larger role in the EURUSD weakness than the actual data. This is evident across the G10 as similar currencies such as GBP and CHF also slide against the dollar.

Despite markets having become somewhat desensitised to hard data releases, they will undoubtedly continue to monitor the hard data stemming from the currency bloc, especially that stemming from Italy. Italy is the worst-hit eurozone country in terms of virus cases and the earliest to implement a national lockdown. The country was also on the brink of a recession when the virus hit. Any data from Italy can, therefore, paint a picture of the worst-case scenario for the bloc.

On the other hand, if the data turns out better than expected, this could be a helping hand to eurozone equities, bonds, and the euro…

This is because the effectiveness of any stimulus measures announced will be gauged against the true economic damage. The latter is still being determined by markets as the hard data is released with a lag, but a more shallow economic contraction bodes well for the support measures returning economic conditions to pre-virus levels earlier than expected. While this remains a tail risk for now, especially as nationwide lockdowns continue indefinitely, any upside surprise in the data will have an inflated impact on risk sentiment in markets.

All eyes are now turned to tomorrow’s agenda which includes CPI numbers for Germany and industrial production data for the eurozone. 


EURUSD – 3 days


GBPUSD – 3 days


Author: Ima Sammani, Junior FX Market Analyst


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