The euro continued its downward movement, which was formed yesterday after a series of weak fundamental statistics on inflation in the Eurozone. Today's data on retail sales in Germany added only pessimism to the market. The report disappointed economists and traders, as after the May peak, when there was a sharp surge in sales against the background of the cancellation of quarantine measures, the indicator began to decline again. A serious decline in volumes will negatively affect the prospects for a V-shaped recovery in the German economy in the 3rd quarter of this year. As we can see, deferred demand is no longer working, and many households are wary of new purchases and everyday spending.
The indicator was not helped by the temporary reduction in VAT, which allowed many sellers to lower their prices. This parameter, if you remember, led to a sharp slowdown in the Eurozone consumer price index in August this year. Experts also expected that the refusal to take vacations due to the coronavirus pandemic could lead to increased spending in the summer, however, this did not happen. However, there are signs of normalization of sales in various areas. First of all, clothing sales have reached their acceptable level, while medicines and related products in pharmacies are losing momentum.
So, today's report from the Federal Bureau of Statistics Destatis shows that retail sales in Germany in July 2020 decreased by 0.9% compared to the previous month. Compared to the same period of the previous year, sales increased by 4.2%. As noted above, retail sales of food and beverages grew by 4.2%, thanks to the recovery in the service sector. Sales of non-food items increased by 4.4%.
Returning to the topic of inflation, after yesterday's rather weak report on the consumer price index, today's data on producer prices were surprising. But we must understand that this is a July indicator, which does not play a special role. The report shows that the Eurozone PPI producer price index in July this year rose by 0.6%, but decreased by 3.3% compared to last year. The data was better than the forecasts of economists, who expected this indicator at 0.5%. However, it should be understood that these are data for July, while such progress in growth in August can not be expected. The Eurozone producer price index excluding energy remained unchanged in July compared to the previous month. Let me remind you that the consumer price index CPI of the Eurozone in August 2020 decreased by 0.2% compared to the same period of the previous year, after an increase of 0.4% in July. Economists had expected the index to grow by 0.2%. Even though global oil and food prices have recovered, this has not led to the deflationary pressures caused by the pandemic.
An interview with Richmond Fed President Thomas Barkin was also published today, who noted that now is not the time to exaggerate concerns about financial stability. We are also talking about the emergency assistance programs that are currently operating in the United States, which will certainly be adopted in the future. However, Barkin is confident that ultra-low interest rates will have to be paid for, however, the economy will need support for a long time, so no one will even think about changing them in the next few years.
As for the technical picture of the EURUSD pair, the market continues to develop in a bearish morning scenario. At the moment, the bears are trying to break through the support of 1.1850, which will certainly push risky assets to new lows in the area of 1.1810 and 1.1760. Under the scenario of growth of the trading instrument, buyers will probably start having problems already in the resistance area of 1.1890, which until recently was a support.
