Teunis Brosens, Senior Economist at ING, suggests that Eurozone retail sales were better than expected but the ECB will not be deterred from additional monetary easing next week. Key Quotes “At last, a positive surprise from the Eurozone. January retail sales increased by 0.4% MoM, taking year-on-year growth to 2.0%, well above the 1.3% YoY consensus expectation. One should never read too much into single month readings of indicators as volatile as retail sales, but after a depressing run of confidence drops and deflation surprises, this analyst is relieved to see that consumers did not hold back on spending in January. In fact, December was revised up as well. Current data reveal that over the past four months retail sales growth has been trending around 2.0% YoY. Retail sales therefore confirm that consumption started the year on a decent footing, with scope for further consumption growth in 2016. Consumer confidence, however, took a turn for the worse especially in February, so it remains to be seen whether consumers will be keeping this up. At its meeting next week, the ECB will therefore not take these positive retail sales figures for granted, given especially this week’s disappointing inflation reading. Among less well covered news this week is that bank borrowing rates nudged up slightly in January, although one should not read too much into changes of a few basis points only. The most important message conveyed by bank rates over the past year is that the long slide from mid-2011 ended in mid-2015 and rates appear to be scraping the bottom since then. If the ECB wants to try and push bank lending rates even lower, it will probably have to roll out new measures. We believe it will do exactly that next week, announcing a cocktail of more negative deposit rates, a broader definition of assets to be purchased under its quantitative easing programme, and a small increase in the €60bn monthly purchasing rate.” For more information, read our latest forex news.