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Wallets Clamped Shut As EZ Consumers Retrench

Last updated 4/6/2009 5:39 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

After posting a tiny rebound the month prior Eurozone Retail Sales turned negative in March posting their second monthly decline this year. EZ March Retail Sales contracted by -0.6% versus forecasts of -0.3% - their worst reading since December 2008 - as European consumers fearful of  rising unemployment continued to curb their spending.

The news on the consumer front does not bode well for the possibility of even a small recovery in the second half of 2009. European consumers continue to remain frugal despite the sharp decline in inflation that has boosted their purchasing power. Their behavior suggests that the Europeans are acting much more like the Japanese did during that country’s decade long deflation of the 1990’s. The collapse of EZ consumer demand could result in a long period of stagnation for the 16 member union which becoming increasingly immune to any fiscal or monetary stimulus. If the European retail sales do not improve soon, the region faces the risk of grinding deflation which could sabotage any growth recovery for the foreseeable future.

After holding  ground for a few minutes in post announcement trade  the EUR/USD& nbsp; started to slip towards the 1.3500 handle as risk aversion and profit taking flows kicked in.  Although Retail Sales is unlikely to have any significant impact, it could dampen any rally in the pair today should equities continues to climb higher during the US session.    

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.