EUR/USD holds losses near 1.1750 as German Retail Sales fall in January

EUR/USD weakened as Germany’s Retail Sales dropped 0.9% MoM, missing expectations for a 0.2% decline.
US Dollar strengthens as risk aversion rises following coordinated US-Israel strikes on Iran.
The Greenback gains support as strong inflation signals tariff pass-through, dimming prospects for Fed rate cuts.

Akhtar Faruqui FXStreet

EUR/USD declines nearly 1%, trading around 1.1740 during the European hours on Monday. The pair struggles as the Euro (EUR) remains under pressure after Germany’s Retail Sales fell 0.9% month-over-month (MoM) in January, undershooting expectations for a 0.2% decline and reversing an upwardly revised 1.2% increase in the previous month. On an annual basis, retail sales rose 1.2%, slowing from December’s upwardly revised 2.5% gain, which had been the strongest pace in five months. Retail sales increased 2.7% in 2025 overall.

Moreover, the HCOB Germany Manufacturing Purchasing Managers’ Index (PMI) rose to 50.9 in February from 49.1 in January. The HCOB Eurozone Manufacturing PMI was confirmed at 50.8, up from 49.5. Both readings marked the strongest levels in 44 months.

The risk-sensitive EUR/USD pair plunged as the US Dollar (USD) gained ground amid increased risk aversion following the United States (US) and Israel's coordinated attack on Iran over the weekend. The joint US-Israeli operation reportedly killed Supreme Leader Ayatollah Ali Khamenei, marking a pivotal moment for Iran. US President Donald Trump said US military operations in Iran are “ahead of schedule,” according to CNBC.

On the United States (US) side, traders await the ISM Manufacturing Purchasing Managers’ Index (PMI) due later in the day, which is expected to inch lower to 52.3 in February, from the previous 52.6 reading. ISM Manufacturing Employment Index data will also be eyed.

The US Dollar also receives support as stronger-than-expected US inflation data suggested firms are passing tariff costs on to consumers, further clouding the outlook for Federal Reserve rate cuts. However, Fed Governor Stephen Miran called for significant interest rate cuts as soon as possible, arguing that underlying price pressures remain subdued and that persistently high rates reflect distortions in inflation measurement.

Euro FAQs

What is the Euro?

The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

What is the ECB and how does it impact the Euro?

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

How does inflation data impact the value of the Euro?

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

How does economic data influence the value of the Euro?

Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.

How does the Trade Balance impact the Euro?

Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

Author

Akhtar Faruqui

FXStreet

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.

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