The Euro continued to trend lower despite mixed economic data. Eurozone Retail PMI rose from 36.3 to 38.2 in July thanks to stronger activity in Germany and Italy.
However despite the improvement, the index remains at very low levels, reflecting the troubles in the overall economy. Consumer and business confidence on the other hand continues to trend lower. This is in line with the drops in the German IFO report and the ZEW survey. We still believe that the EUR/USD is headed for further losses and a break below 1.55 may just be a matter of time. German unemployment data is due for release tomorrow along with Eurozone consumer prices. The rise in the employment component of service PMI suggests that the number of people claiming unemployment benefits will fall once again. As for consumer prices, the number should continue to reflect strong inflationary pressures. Meanwhile Switzerland’s KoF report of leading indicators was weaker than expected. Despite the rise in the UBS consumption index, the outlook for the Swiss economy has deteriorated. However we still believe that Switzerland is faring much better than many of its other G10 counterparts.
