Eurozone’s Worried Consumers, Banks Stockpiling Cash

The German Statistics office earlier reported that seasonally adjusted retail sales in November fell to -0.9% on a month over month basis, well off the consensus forecast of 0.2%. Data from October was also revised downward from the previously reported 0.7% to -0.2%. On a year over year basis, retail sales showed some improvement at 0.8%, besting expectations of 0.7%. Again, the data from the previous period was revised downward to -0.6% from -0.4%.

In Germany, the primary driver of the Eurozone’s growth, the economy is seen as more robust than elsewhere within the bloc. Today’s data, however, underscores the reality that German consumers are equally as concerned over their future as their European counterparts, choosing to save rather than spend, even ahead of the Christmas holiday.

The heads of the Eurozone’s many banks appear to be thinking along a similar line. According to the European Central Bank’s records, overnight deposits by commercial banks continue to rise in the face of ongoing debt fears. A new record in overnight deposits was made on Wednesday, amounting to some €453 billion. Notably, the ECB’s overnight deposit rate is 0.25%, a significant difference from the 0.396% interest that banks could earn if they lent their cash on the open market. What that says to analysts is that the banks’ are more worried about inter-bank lending than they’ve been willing to admit, choosing safety over risk.

Concerned about a possible liquidity crunch, last month the ECB engaged in a 3-year low-interest rate liquidity operation, unusual in scope because the offering was unlimited; the operation resulted in unprecedented demand of €489 billion. The hope had been that banks which borrowed from the ECB would use those funds to lend, but it appears that they have rather chosen to hoard it.

On the eToro OpenBook platform, the Euro-Dollar is trading lower at 1.2920, and just off the session low of 1.2910. A bearish sentiment dominates among traders of the EUR/USD pair. Mirroring sentiment on the trading floor, eToro trader pyruss has opened several short positions in the pair. However, trader moksel1972 appears to be waiting for a Euro rally, and earlier opened up a long position, targeting 1.2956