Euro kicked off this busy trading week with modest gains against the U.S. dollar. Despite continued lockdowns in some of the region’s biggest economies, slow vaccine rollout, and lower growth forecasts from France and Spain, the single currency has been extraordinarily resilient. It quietly moved higher since the beginning of the month rallying from 1.17 to 1.19. Better than expected retail sales data helped extend the pair’s gains on Monday. Consumer spending rose 3% in the Eurozone in February, double the market’s expectations. Spending in January was also revised up to -5.2% from -5.9%. This follows last week’s upwardly revised German PMIs and the strongest German business confidence since June 2019. So while the near-term outlook is grim, the recovery is delayed not threatened and that prospect keeps economic activity going.

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The question now is how much longer can the rally continue with U.S. inflation and retail sales numbers scheduled for release this week. Vaccinations and stimulus checks should drive strong spending in March. Economists are looking for a 5.7% rise but the numbers could easily beat expectations. Inflation is also on the rise and between these two reports, we could see renewed demand for the greenback. Add to that the possibility of Germany lowering its growth forecasts and there’s a good chance the rally could fizzle quickly this week once U.S. CPI numbers are released. Before that, the German ZEW survey is due and it will be interesting to see if investor confidence is finally dented by recent lockdowns.

The greenback extended lower against all of the major currencies with sterling leading the gains. Aside from CPI and retail sales, the Empire State and Philadelphia Fed surveys are scheduled for release. A number of Federal Reserve officials will also speak. On Sunday, Fed Chairman Powell said the U.S. is at an inflection point, the outlook brightened significantly and with America going back to work, the economy will start growing more quickly. He also cautioned against reopening too quickly and stressed the importance of taking steps to avoid flareup in virus cases that could set back the recovery.

Sterling traded sharply higher ahead of Tuesday’s industrial production, monthly GDP, and trade balance reports. Improvements are expected all around as investors look forward to relaxed restrictions. As of midnight Monday, pubs, gyms, salons, and retail sales will be reopening, some for the very first time in a year. This phased reopening will go a long way in accelerating the country’s recovery.

The Australian and New Zealand dollar also traded higher while the Canadian dollar lagged behind. The relative underperformance of the loonie is surprising given last week’s strong employment and IVEY PMI reports. Oil prices also rose on Monday. The Bank of Canada is poised to update its business outlook and given these reports, stronger confidence is likely.