Eurozone retail sales rebound in May after April slowdown

Eurozone retail sales rebounded in May, recovering from a sluggish April as consumers increased spending across most categories.

According to data released Tuesday, the volume of retail trade rose 0.6% month-on-month in May, driven by a broad-based uptick. Sales of food, drinks, and tobacco increased 0.6%, while non-food products edged up 0.1%. The only weak spot was automotive fuel, which fell 0.5%. On an annual basis, retail sales were up 1.6%, suggesting that consumer demand is holding up better than some had feared given elevated inflation.

For currency traders, the retail sales data offers a mixed signal for the euro. While the rebound supports the view that the eurozone economy is not sliding into recession, the modest pace of growth does not alter the European Central Bank's gradual approach to policy normalization. The ECB has signaled it will proceed cautiously with rate cuts, and resilient consumption reduces the urgency for aggressive easing. This could keep the euro supported against currencies where central banks are more dovish, such as the yen or franc. Live FX prices and charts on NowPrice show how the euro is reacting to the data in real time.

Looking ahead, traders will focus on upcoming inflation readings and the ECB's July meeting for further clues on the rate path. If retail sales continue to improve, it could reinforce expectations that the ECB will hold rates steady for longer, potentially providing a floor for the euro. However, any deterioration in consumer spending in the coming months could revive bets on rate cuts and weigh on the single currency.